Sri Lanka is facing serious economic crisis these days. In these circumstances, the relations of this country with China and India have taken an interesting turn. So far Sri Lanka has been trying to balance the two countries and benefit from the geopolitical interests of China-India. Now he is looking to India for help. Sri Lanka is facing the worst economic crisis since independence in 1948.
In these circumstances, India is going to give a credit line (easy loan) of one billion dollars to this neighbor. Also, trying to get a loan from the World Bank. India will give 40 thousand tonnes of fuel to Sri Lanka. According to experts, China has trapped Sri Lanka in a debt trap and because of that the economic crisis has arisen.
Sri Lanka had taken a total loan of five billion dollars from China. After this, in 2021 also took another loan of one billion dollars from China. When Sri Lankan President Gotabaya Rajapaksa recently asked China to ease the loan terms, it refused. Now India is providing help to rescue this neighbor. Recently, Sri Lanka’s Finance Minister Basil Rajapaksa visited India and sought help.
what are the circumstances
Sri Lanka reached the brink of destitution within a year to such an extent that the people there left the country and started migrating to many parts of India. Sri Lanka’s foreign exchange reserves used to be more than five billion dollars a year ago and it has come down to one billion dollars. He is being speculated to be bankrupt. Sri Lanka is unable to purchase essential oil for power generation due to lack of foreign exchange.
Due to this there is a power cut. There is a crisis of petrol and diesel. All these developments are the result of the Balance of Payments (BOP i.e. the difference between total capital inflows into the country and capital out of the country) at a given point of time. Sri Lanka has been struggling since the beginning of 2020. Sri Lanka lost $4 billion in annual foreign exchange inflows from tourism due to the COVID-19 pandemic. Many decisions on the economic front proved to be harmful. Sri Lanka’s foreign exchange inflows fell sharply.
Why China?
According to media reports, this condition of Sri Lanka is due to taking loan from China. Sri Lanka is deeply entangled in the debt trap of China. Sri Lanka has taken a total loan of five billion dollars from China. In 2021 also took a loan of one billion dollars from China. Apart from this, Sri Lanka has also taken loans from India and Japan. The country has to repay the debt of 7 trillion US dollars.
According to official figures, as of April 2021, Sri Lanka had an external debt of $ 35 billion, of which China’s share was 10 percent. Sri Lankan President Gotabaya Rajapaksa is being considered mainly responsible for making his country indebted. It is being said that he himself took a huge loan from China.
Sri Lanka has leased Hambantota Port to China for 99 years for 1000 crores. A few years ago a major port project was started in Hambantota with the help of Chinese investment. The multi-billion dollar project, which was started with the help of Chinese loans, got embroiled in controversy.
The project was not being completed and Sri Lanka was buried under Chinese debt. After an agreement in 2017, Sri Lanka gave 70 percent of the port’s stake to China on a 99-year lease, after which China started investing in it again. China has been accused of encroaching on its properties when the countries taking loans from it are unable to repay it. Although China denies such allegations.
been doing.
hunger and inflation
There, one kg of sugar is available for Rs 290, one kg of rice for five hundred rupees and four hundred grams of milk powder for Rs 790. The price of petrol has increased by Rs 50 and that of diesel by Rs 75. Sri Lanka is dependent on imports for oil, food, paper, sugar, pulses, medicine and transport parts. Sri Lanka has only a dollar left to import these essential items for 15 days.
The situation is such that the government does not even have the paper and ink to print the examination papers. In the case of diesel-petrol and gas, the situation has become more serious. Some people have also died in the affair of buying petrol and diesel. The situation has worsened to such an extent that the Sri Lankan government has decided to deploy troops at petrol pumps and gas stations.
In Sri Lanka, 20 percent of households still depend on kerosene for cooking. People are also not getting kerosene. Due to lack of crude oil, the government had to close the only oil refinery.
what the experts say
President Gotabaya Rajapaksa is striving to improve the economy of Sri Lanka and India is going to play a big role in that. India is helping financially. The steps taken by India will help in building trust between the two countries. This will also end India’s concerns about China’s increasing activity in Sri Lanka.
- Milinda Moragoda, Sri Lankan High Commissioner to India
India-Sri Lanka relations have undergone many changes in the last thirty years. Sri Lanka’s internal political situation and India’s response to it have shaped much of the bilateral relationship. Sri Lanka, which is facing a shortage of food and drink, is now on the verge of an economic disaster, which, if not controlled, will have a serious impact on India’s security situation.
- Jitendra Nath Mishra, former Indian diplomat