New Delhi: Economic aid from India to the tune of $4 billion helped debt-ridden Sri Lanka secure its $2.9 billion bailout package from the International Monetary Fund (IMF) earlier this year, the country’s high commissioner to India, Milinda Moragoda, has said.
“India supported us during the crisis last year by extending $4 billion. If India had not provided that support, we would have been in a much more difficult situation,” he said at a special interaction with ThePrint team on 22 June. “There’s no question about it. I think the IMF only became possible because of India.”
In April 2022, Sri Lanka declared its first sovereign debt default — triggered by a forex shortage — amid the worst economic crisis to hit the country since its independence from Britain in 1948. The island nation witnessed soaring inflation, a massive power crisis, and shortages of medicine, fuel and other essentials. The ensuing street protests eventually led to the ouster of then president Gotabaya Rajapaksa.
In an hour-long conversation, Moragoda spoke about the crisis, his country’s current economic condition and its slow path to recovery, and the issue of cross-border drug trafficking.
He also hinted at a possible visit to India by Sri Lankan President Ranil Wickremesinghe next month, but did not divulge details.
Road to recovery
The crisis led the Sri Lankan economy to shrink by 7.8 percent last year, and, according to media reports, it’s expected to contract another 2 percent in 2023.
According to Moragoḍa, the economy needs “major restructuring” and also needs to better realise its potential for tourism.
The diplomat also spoke about Sri Lanka’s ties with China, and especially the “debt trap” that some have blamed for last year’s crisis.
Sri Lanka’s total debt is $30 billion, Moragoda said. Out of this, debt owed to China alone is $5.7 billion — $2.7 billion in commercial loans and $3 billion in multilateral loans.
Sri Lanka’s “debt trap is our own (doing) and no one else’s”, he said.
He also highlighted the differing views on how best to tackle the havoc that Covid-19 had wreaked on the country’s economy. “Nationalists”, Moragoda said, wanted to make the country self-reliant using organic farming, while others saw the pandemic as an opportunity to restructure the way Sri Lanka engaged with the world and global institutions.
He was referring to the Rajapaksa government’s resolution on 6 May, 2021, that made a switch to organic farming — a policy move that is believed to have caused significant distress among farmers.
Towards a ‘strategic partnership’ with India
Moragoda believes that there’s a need to take the relationship between Sri Lanka and India “from the current transactional one to a special strategic partnership, identify common areas and have long term relations”.
For this, Sri Lanka is looking at various avenues of increasing connectivity and trade between the two countries — such as importing oil from Indian refineries and introducing passenger ferry services between India and Sri Lanka.
In terms of defence, Sri Lanka is also focussing on maritime security and surveillance collaboration with India, he said, adding that intelligence agencies of the two countries are working together to combat cross-border drug trafficking.
(Edited by Uttara Ramaswamy)
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