Economic crisis in the island nation has provided an opportunity for Sri Lanka and India to deepen their relationship

News: In the backdrop of the economic crisis in Sri Lanka,  Foreign Minister S Jaishankar is visiting Sri Lanka that began on Monday. Both countries are expected to sign agreements, including in defence and maritime security. This is a follow up to the $2.4 billion financial aid India has extended over the past few months.

Causes of Sri Lanka’s economic crisis:

1. Mounting debt of Sri Lanka – So high that it can’t even pay for fuel and food grain imports.
2. A hit to tourism – due to Easter bombings in 2019 and the Covid pandemic.
3. Ukraine war – which disrupted supply routes, leading to shortage of essential goods.
4. Ill-timed policies – For instance, promotion of organic farming has fueled fertilizer shortages and a fall in output.
5. Heavy foreign borrowing – Particularly from China, to build infrastructure, including a mega port city in Hambantota. These capital-intensive projects did not deliver the expected returns.

What is Delhi doing?

Besides extending a credit line, Delhi has started work on a series of joint projects including the Trincomalee Oil Tank Farms, renewable power projects, and a cultural centre in Jaffna.

However, considering the complex history between the two countries, India should tread cautiously in this moment in Sri Lanka.

Source: This post is created based on the article “Economic crisis in the island nation has provided an opportunity for Sri Lanka and India” published in The Indian Express on 29^th March 2022.