GS Paper 2
Syllabus: International Relations
Source: TH
Context: Sri Lankan President announced that the country had cleared the last hurdles to be approved for a $2.9 billion bailout from the IMF.
Background: The country has been reeling from the covid crisis, economic mismanagement by the Rajapakse regime, mounting debts → soaring inflation → GDP/ Exports collapse → Currency collapse.
What the IMF bailout would mean for Sri Lanka?
- Brings a lot of creditworthiness to the entire system and confidence.
- A lot of other agencies like the World Bank, AIIB, and ADB, have lined up funds to come in.
- Debt becomes more sustainable → access to the capital market → stabilizing the economy.
How India supported its neighbor?
- Contrary to China, India’s support has come unconditionally, and more promptly.
- India’s support to Sri Lanka (worth a combined $4 bn) includes –
- Shipments of grain, fuel, essentials, medicines
- Credit lines
- Debt repayment relief
- Support at the IMF to work on the bailout package
- Support at the G20 and BIMSTEC
How did Sri Lanka respond to India’s support?
- “India had really come to our rescue, India had provided us with a lifeline which allowed us to stay afloat during a very difficult time,” Minister of Foreign Affairs of Sri Lanka.
- In a speech on Women’s day, Sri Lankan President thanked 3 women – Nirmala Sitharaman, Janet Yellen, and Kristalina Georgieva for helping Sri Lanka.
- Sri Lanka is looking for more investments from India in IT, pharmaceuticals, the energy sector, education, etc.
Challenges ahead:
- For India:
- The controversy over Adani projects in Sri Lanka (2 wind power plants in Mannar and Pooneryn areas of [northern] Sri Lanka, West Container Terminal at Colombo Port, etc).
- The opposition had raised issues over the manner of choosing the company.
- For Sri Lanka: How can Sri Lanka balance its ties with China and India?
- Sri Lanka has been a very close friend of India and doesn’t want to hurt India’s security concerns.
- Despite all the problems China is also India’s biggest [trading] partner.
- Similarly, Sri Lanka also wants to work with Indians and the Chinese, and the rest.
Conclusion: Sri Lankan crisis and reversal is a good example for the region – it is about being more sensitive to a neighbor’s needs rather than outspending rivals.
Insta Links:
The many ways of helping Sri Lanka
Mains Links:
In respect of India — Sri Lanka relations, discuss how domestic factors influence foreign policy. (UPSC 2013)
