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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:
- Mounting debt of Sri Lanka – So high that it can’t even pay for fuel and food grain imports.
- A hit to tourism – due to Easter bombings in 2019 and the Covid pandemic.
- Ukraine war – which disrupted supply routes, leading to shortage of essential goods.
- Ill-timed policies – For instance, promotion of organic farming has fueled fertilizer shortages and a fall in output.
- 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 29th March 2022.
