The Editorial Analysis- Friend in Need

Table of Contents

India-Sri Lanka Relations- Relevance for UPSC Exam

GS Paper 2: International Relations- India and its neighbourhood- relations.

India-Sri Lanka Relations- Context

Recently in the context of ongoing economic and health concerns, the External Affairs Minister of India held a virtual meeting with Sri Lanka’s Finance Minister.
He assured that India will support Sri Lanka “in all possible ways for overcoming the economic and other challenges posed by COVID-19 pandemic”.

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India-Sri Lanka Relations- Economic Challenges faced by Sri Lanka

Debt Serving Issue: Sri Lanka is facing the issue of servicing debts to bonds with an installment of $500 million due on January 18.
- Given the island’s precarious finances, the Sri Lankan government has to take a decision whether to service this or default for the first time ever.
Other Issues: Sri Lanka is facing many issues like credit crunch, a slump in GDP spurred by COVID-19 losses to tourism, exports and remittances, foreign reserves.
- Foreign Reserves dwindled from $7.5 bn in 2019 to $1.6 bn in November 2021, and pending debt repayments of more than $7 bn expected in 2022.
Unrest in the country: The most immediate problems to the Sri Lankan government come from rising unrest in the country due to the present economic crisis.

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India-Sri Lanka Relations- Support from China

China and Sri Lanka discussed a full debt restructure of Sri Lankan borrowings.
Beijing has also extended a currency swap arrangement of $1.5 billion to Sri Lanka.

India-Sri Lanka Relations- Support from India

Indian Foreign and Finance minister in coordination with Sri Lankan Finance Minister decided on a four-pronged initiative to thwart the present Sri Lankan Economic Crisis. These are-

Lines of Credit (LoC): the $1.5 bn LoC for essential imports is reportedly underway.
- This facility is to be utilized towards the import of fuel, food, and medicines from India.
Currency Swap Arrangement: India has extended $400 million under the “SAARC currency swap” arrangement.
Debt deferrals: India has also agreed to a partial deferral of a $500 million settlement from Sri Lanka in two months.
Conclusion of the Trinco-oil farms project: Trincomalee project MoU was signed earlier this month after decades of delays.

India-Sri Lanka Relations- Conclusion

In times of peril, New Delhi and Colombo have established a robust channel of communication and demonstrated an ability to act on promises quickly, proving that adage about friends in need.

Sri Lanka Economic Emergency