“A friend in need is a friend indeed” is the saying as it goes. The dictum is in full play as India has offered Sri Lanka an additional $500 million to help it to import fuel while it is in an advanced stage of discussion with the International Monetary Fund (IMF) for a bailout package.
Sri Lanka, which is grappling with one of the worst-ever foreign exchange crises and a shortage of essential commodities, was extremely disappointed when China declined to come forward in support of the country on flimsy grounds.
The fresh $500 million additional support by India to Colombo is over and above the $ 1.5 billion credit line offered by India earlier.
The economic situation in Sri Lanka is dire and it had requested both India and China for support in these difficult times.
India responded with an additional $500 million for the time being against Colombo’s request for $ 1 billion, but China cited difficulties in supporting the country.
The RMB 200 million ($ 31 million) of Chinese humanitarian assistance to Colombo is a diplomatic way of denial rather than genuine support.
Sri Lanka had asked for $ 1 billion loans and $ 1.5 billion buyer’s credit from China and the so-called “humanitarian assistance” is of no avail for a country which is facing difficulties in importing even essential commodities.
Sri Lanka needs at least $4 billion to meet its immediate debt service and import requirements.
Ali Sabry, the new Finance Minister of Sri Lanka is presently holding talks with international institutions including the IMF, the World Bank, China and Japan.
He expressed hope that if the efforts are successful and an investment of $ 2 billion comes to the Central Bank, it will help stop the depreciation of SLR and stabilise it.
After last week’s announcement by Colombo about the imminent default of $ 35.5 billion in foreign debt by it due to disruptions caused by the Covid-19 pandemic and the Ukraine war, it started pro-active deliberations with the IMF for a bailout package.
The IMF management met the Sri Lankan delegation led by Finance Minister Ali Sabry and Central Bank of Sri Lanka Governor Nandalal Weerasinghe in Washington DC. The Sri Lankan delegation discussed policy actions to address economic challenges.
The discussion between the Sri Lankan delegation and multilateral agencies revolved around recent economic and financial developments in Sri Lanka, the need for implementing a credible and coherent strategy to restore macro-economic stability and the importance of stronger safety nets to mitigate the adverse impact of the current economic crisis.
Sri Lanka has to repay about $ 7 billion this year in debt servicing and other obligations. It has sought $ 4 billion of multilateral assistance from the IMF.
India has also supported Sri Lanka’s efforts in this regard. Many analysts view that had China come forward with a supporting hand, Colombo could have averted default and succeeded in tiding over its economic malaise till it could manage to get a bailout package from the IMF. Instead, China showed indifference much to the dismay of Colombo.
Meanwhile, the Sri Lankan government is confronting widespread public protests which initially demanded resignation from Prime Minister Mahinda Rajapaksa and President Gotabaya Rajapaksa and are now demanding to form an interim government to tackle the economic crisis.
However, Mahinda Rajapaksa while rejecting the demand for an interim government noted that “people need to show patience to face the crisis”.
However, the public is losing patience amid a shortage of food fuel, power, medicine and other essential items. Meanwhile, the country continues to face the problem of fiscal and current account deficits along with a foreign exchange crisis. It has been pushed to default on foreign debt servicing.
Sri Lanka needs support and the countries which feign to be well-wishers of Colombo should ideally come forward. This is a moral obligation.
India has extended its support and is willing to help in all possible ways. But China, which invested in mega projects in the country and pushed it into a debt trap was now giving the pretext of “difficulties” rather than providing support. No self-respecting country could ever erase such bitter experiences from its memory.
Sri Lanka is not just a green pasture for investment and strategic leverage. It is a country of 2 crore human beings, grappling with the most difficult times of their life.
It needs solidarity in the time of adversity and not kindness or alms like the Chinese “humanitarian assistance”.