With Sri Lanka facing an acute foreign exchange crisis which was highlighted by the President Gotabaya Rajapaksa in an address to the nation on March 16th, after massive protests broke out in the country led by the opposition, India has turned out to be a savior.
Opposition Rally
Opposition Samagi Jana Balawegaya (SJB) organized huge protests the government in the capital Colombo on March 15 which drew massive crowds. The rally led by the Leader of the Opposition Sajith Premadasa was held opposite the Presidential Secretariat under the theme "The country ruined - enough tolerating,’ protesting rise in “cost of living, the shortage of fertilizers in the country, the fuel and gas crisis and the pressures faced by the people including power cuts,”.
The protesters wore black bands saying "Gota Go Home." Opposition Leader Sajith Premadasa, Party Chairman Field Marshal Sarath Fonseka, General Secretary Ranjith Madduma Bandara and other parliamentarians also joined the protests
President Responds
Sri Lankan President addressing the nation on March 16th requested the people to have faith in his actions to find solutions to the inconveniences that the people are experiencing and alleviate many sufferings due to the shortages of essential items and increase in prices as per the Colombo Page. “I am also very sensitive to the many sufferings the people must experience over the past two months. I know that this situation will continue for reasons beyond our control though we make maximum possible efforts about these situations,” he said.
He stated that he intended to take tough decisions. “Therefore, first of all I request you to have faith in the actions I will take on behalf of the people,” the President said and promised to fix the foreign exchange crisis. He outlined measures being taken to alleviate the same including fixing the “trade deficit and increase foreign exchange reserves,” including discussions with, “international financial institutions as well as with friendly countries regarding repayment of the loan installments and following yesterday’s discussions with the International Monetary Fund (IMF), he has decided to work with them after examining the advantages and disadvantages”.
Indian Bailout
The Rajapaksa family which has been in power in Sri Lanka for the last one and a half decades plus but for a short interim period from 2015 to 2018 is known to be close to China. India has had troubled relations with the Rajapaksa’s in the past due this factor.
The second eldest brother and Prime Minister Mahinda Rajapaksa openly blamed India for his election defeat in Sri Lanka in 2015.
However, the acute financial crisis in the country has led to a review by both sides. India is keen to regain the space in Colombo after having seceded the same for China which has succeeded in establishing a strong foothold in the strategic island in the Indian Ocean region with major projects such as the Hambantota Port, the Colombo City Project, and Eastern Container Terminal. India was vying for the last named but was rebuffed by the present government led by the Rajapaksa brothers.
Nevertheless, it appears that there is reconciliation which will be to the advantage of both the countries.
India and Sri Lanka are expected to finalise a $1-billion line of credit to bail out President Gotabaya Rajapaksa’s government and enable it to make emergency purchases of food, medicines, and essential items.
This is the main purpose of the visit of Finance Minister of Sri Lanka, Basil Rajapaksa, another of the brothers who on an official visit to New Delhi, called on Prime Minister Shri Narendra Modi.
A Ministry of External Affairs press release indicated that Finance Minister Rajapaksa briefed the Prime Minister on initiatives being taken by both countries to increase bilateral economic cooperation, and conveyed his thanks for the support extended by India for the Sri Lankan economy.
Prime Minister spoke about the central role that Sri Lanka occupies in India’s ‘Neighbourhood First’ policy and its S.A.G.A.R (Security and Growth for all in the Region) doctrine. He reiterated that India would continue to stand with the friendly people of Sri Lanka.
Defusing Political Risks
While India has had differences with the Rajapaksa government in the past, the bailout package may provide much relief to President Gotabaya whose militarized administration has failed on many fronts including management of COVID 19.
This is in the overall interest of the Sri Lankan people at large as an acute economic crisis bringing instability in the country will not be favourable to India as well.
As far as the political future of the Rajapaksa’s much will now depend on whether they are able to manage the economy hereafter and whether opposition unifies to pose a major challenge to the government.
Impact on India Sri Lanka Relations and China
The China factor in Sri Lanka is unlikely to go away despite India's timely assistance to the Rajapaksa government in a bail out from an economic crisis that has transitioned now to a poltical one of survival. However New Delhi's hand are temporarilly strengthened.
Perennial issues such as apprehension of Tamil Nadu fishermen by the Sri Lankan Navy are expected to remain concerns in the immediate term.