Editorial: Neighbour in peril
The dangerous meltdown in Sri Lanka, in the wake of public anger and violence spiralling out of control, can have security implications for India. The situation needs to be handled with sensitivity. As a close neighbour with historical ties, India has demonstrated its support and extended a helping hand in the hour of crisis. However, […]
The dangerous meltdown in Sri Lanka, in the wake of public anger and violence spiralling out of control, can have security implications for India. The situation needs to be handled with sensitivity. As a close neighbour with historical ties, India has demonstrated its support and extended a helping hand in the hour of crisis. However, New Delhi cannot afford to give even a remote impression that it is trying to fish in troubled waters. So far, it has done well to take a nuanced approach, saying it would always be guided by the best interests of the Sri Lankan people expressed through democratic processes. The situation has become complicated following the reluctant resignation of Mahinda Rajapaksa as Prime Minister and his supporters going berserk and attacking the protestors. There is a possibility of refugees fleeing to India, bringing turbulence in its wake. The ethnic connection with India and the history of the LTTE’s strife against Indian forces inspire no confidence in the emerging situation. Having burnt its fingers in the past with the botched IPKF (Indian Peace Keeping Force) operations, New Delhi must now tread cautiously. There is a growing discomfiture within India over Colombo’s crackdown on protesters. In keeping with the ‘Neighbourhood First’ policy, India has extended support worth over $3.5 billion to help them overcome the crisis. In addition, assistance was given for mitigating the shortages of essential items such as food and medicine.
Sri Lanka’s economic condition shows no signs of improvement, despite international help pouring in. Fuel, medicines and essential commodities continue to be in short supply. The country’s negotiations with the International Monetary Fund (IMF) are ongoing. India has added $200 billion to the $2.4 billion it had already given to Colombo. The Sri Lankan government is also seeking additional finances from China, though there is no word on whether Beijing will provide this assistance. Colombo’s crisis has been in the making for over a decade due to excessive dependence on imports and borrowings for a raft of massive infrastructure projects. It highlights how unbridled borrowing for big-ticket infra projects such as those under China’s Belt and Road Initiative can lead to terrible complications. The government’s ill-advised switch to organic farming and badly-timed tax cuts squeezed revenues. The pandemic has dealt a further blow as revenues from tourism and remittances, the two key sources for earning foreign exchange, hit rock bottom. It stands as an example of how fiscal profligacy and foreign debt overload can wreck the economy. The situation came to such a pass, with critically low forex reserves and mounting public anger on the streets, that the government had announced that it would default on its entire external debt of $51billion.
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