Sri Lankan Prime Minister Mahinda Rajapaksa has finally resigned, following unprecedented demonstrations and escalating violence across the country, particularly in the capital Colombo. With prices of essential commodities surging, agricultural production declining and tourism earnings virtually zero, the country is going through its worst ever economic crisis. Divisions have arisen in the ruling establishment over the role of the Rajapaksa family.

The Sinhala opposition has joined hands with Tamil Legislators, to confront the government.

Interestingly, China, which has for long been regarded as a “Good Samaritan” in Sri Lanka, has offered precious little to help out in this deep crisis. It was External Affairs Minister S Jaishankar and Finance Minister Nirmala Sitharaman who stepped in to lend a helping hand. The Finance Minister has urged international financial institutions in Washington to act expeditiously in providing funds to Sri Lanka.

Indian initiative

India has skilfully moved together with Japan, to ensure that China does not have exclusive, or dominant control, of the Colombo Port, through which significant amounts of India‘s trade is moved. In a 35-year agreement, signed recently, India’s Adani Group will have a 51 per cent stake in the expansion of the Colombo Port, together with the Sri Lanka Port Authority. The port project will be backed by Japanese funding. The project is located virtually next to the China-backed, Colombo International Container Terminal.

An estimated 75 per cent of the traffic in the Colombo Port is made up of goods to or from India. What is equally important is that even as the Sri Lanka government was commencing negotiations with the IMF for a long-term arrangement to meet its financial challenges, India urged the IMF to expedite action on assistance for Sri Lanka. Finance Minister Nirmala Sitharaman made an impassioned call in Washington DC for expeditious provision of funds for Sri Lanka. The IMF has since announced that it has held “fruitful technical discussions” with Sri Lanka.

It is now acknowledged that these activities have been facilitated by the manner in which India has joined the Sri Lanka government, by participating in and financing the herculean relief effort required in Sri Lanka.

The Export Import Bank of India and the Sri Lankan Government signed a $500-million Line of Credit Agreement for purchase of petroleum products on February 2, 2022. Under this agreement, 10 consignments of fuel totalling 4 lakh tonnes have been supplied so far.

In response to a separate and urgent request from the Sri Lankan government, extension of credit facilities for $1 billion, for supply of essential items including food and medicine, has been finalised. The first shipment of rice under this facility has reached Sri Lanka.

Earlier in January, India provided financial assistance to Sri Lanka, which included a currency swap of $400 million, deferment of Asian Clearing Union payments of $515 million, and again of $498.9 million.

In cumulative terms, Indian support to the people of Sri Lanka in the first quarter of 2022 has been in the range of $3 billion. Sadly, however, the people of Sri Lanka are continuing to go through very difficult times.

India looks at Sri Lanka not merely as an immediate neighbour, but as partner for stability and cooperation across the Indian Ocean region. While Chinese efforts to be the sole partner of Sri Lanka in the Colombo Port have been balanced, the ownership of the Hambantota Port, which is also the constituency of the Rajapaksa family, remains a source of concern.

Unable to repay Chinese loans for the construction of the port, Sri Lanka has virtually handed it over to China. Colombo is, however, hopefully better aware now of India’s concerns about the Chinese presence in Hambantota.

The writer is former Indian High Commissioner to Pakistan