Sri Lanka_The International Monetary Fund (IMF) had received India’s message the day before Jaishankar’s visit on January 20 that India fully supports Sri Lanka’s debt restructuring proposal.
The first bilateral creditor to do this is New Delhi. Similar assurances from China and other creditors have also been requested by Sri Lanka.
The IMF stated in a statement on Monday that “a Fund-supported package for Sri Lanka can be presented to the IMF’s Executive Board for approval that would unleash much-needed financing as soon as necessary assurances are acquired and remaining requirements are completed.”
To get through its economic crisis, Sri Lanka met the criteria for an IMF Extended Fund Facility in September worth $2.9 billion, but as a condition, Colombo’s bilateral creditors had to guarantee financing for the debt sustainability. The largest bilateral creditors of Sri Lanka are China, Japan, and India.
The restructuring plan must treat all creditors equally, according to the principal concern of the creditors. India and China declined the Paris Club’s invitation to join the platform, which was extended by the group of 22 OECD countries, of which Japan is a member. China has not yet made its intentions apparent; bilateral talks between India and Japan and Sri Lanka have already taken place.
In Colombo, Jaishankar claimed that India, following the Neighbourhood First policy, “did not wait on others and opted to do what we believe is right” by approaching the IMF first. He hoped that this would be followed by other bilateral creditors. Without mentioning any other nations, he stated that India anticipated that its initial move would not only assist Sri Lanka solidify its position but would also ensure that all creditors would be handled fairly.
They would now be even more acutely aware that not only did Beijing not contribute last year, but that its apparent unwillingness to provide the confidence the IMF wants might torpedo any recovery plan. The Sri Lankans were grateful for the $ 4 billion bailout from New Delhi last year.
China accounts for 52% of the total bilateral debt, followed by Japan with 19.5% and India with 12%.
Sri Lankan president invited to S Jaishankar
As soon as possible after entering office, Sri Lankan presidents typically travel to New Delhi for the first time. India broke with precedent in 2019 when Jaishankar travelled to Colombo to congratulate Gotabaya Rajapaksa on becoming president and extend an invitation for him to visit New Delhi. India reacted carefully after Rajapaksa was ousted because the majority of Ranil Wickremesinghe’s support in the parliamentary vote came from the Rajapaksas’ SriLanka Podujana Peramuna.
The Indian High Commission in Colombo provided the first response, assuring “the people” of India’s support in their efforts to restore the economy “through democratic means and values, established democratic institutions, and constitutional framework.” Only one week later, Narendra Modi sent his congratulations and reiterated India’s support for the Sri Lankan people.
During his first two trips overseas, President Wickremesinghe travelled to Japan and the UK to attend the funerals of Prime Minister Shinzo Abe and Queen Elizabeth, respectively.
It hasn’t taken New Delhi this long to extend an invitation to a new Sri Lankan president since at least the 1990s. Wickremesinghe will “go to India soon to discuss how our collaboration might support Sri Lanka’s rapid recovery.”
The Message
Since Basil Rajapaksa, Sri Lanka’s then finance minister, arrived in India at the end of 2020 to seek assistance for the country’s looming crisis, India has made it clear that its cooperation will be based on the “four pillars” of energy security, food security, currency support for foreign exchange, and Indian investment in Sri Lanka.
In the past year, India has been successful in advancing both new and long-delayed projects, such as the Adani investment in wind farms in northwestern Sri Lanka and the Trinco oil tank facility. At the Colombo port, the West Container Terminal is also being built by the Adani Group. However, complaints about the transactions’ apparent quid pro quo are still being heard in Colombo.
The first direct message from Jaishankar was that financial aid is a band-aid and cannot, by itself, put Sri Lanka on the path to economic recovery. India was prepared to provide the necessary investment, but Colombo must first create the correct conditions. Jaishankar made it apparent that India was interested in the infrastructure, tourism, and energy industries.
“We rely on the Sri Lankan government to foster an atmosphere that is conducive to business in order to generate a pull factor. I am sure that the policy makers in this place are aware of how serious the issue is, he remarked.
It is stated that Sri Lanka has significantly more renewable energy potential than it can use. A sustainable source of income is anticipated to come from selling the surplus to India by connecting to an Indian grid via underwater cables. Additionally, Trincomalee’s oil storage capacity might be used to guarantee energy security for Sri Lanka and the surrounding area.
According to Jaishankar, the two nations “agreed in principle on a framework for renewable energy that would advance this cooperation.”
The second message, which India has made clear and forcefully over the past few months, is that Sri Lanka’s government must put the 13th amendment to its constitution into effect.
At India’s involvement in 1987, the amendment which calls for elected provincial councils was first proposed.
On the Tamil demand for decentralisation, it is the single concession in the constitution.
The amendment sought to establish a provincial council in Sri Lanka’s Tamil north-east, but Sinhala-Buddhist nationalists fought it tooth and claw both back then and still. The entire nation was divided into provinces for the first time since it could not be an unusual provision.
The North East’s first provincial council, which was formed in 1989–1990, did not last long. Only in 2013, four years after the civil war ended, were the elections for the northern and eastern provincial councils (the region had already been divided into two). Additionally, Sri Lanka last had elections for provincial council at that time.
The “complete implementation of the 13th amendment” and early provincial council elections, according to Jaishankar, who met with TNA leaders, are “essential” for Sri Lanka’s political stability. It was discussed during the Rajapaksa administration whether to strike it from the document. However, some of the political leadership in the Tamil community has expressed the necessity for a “13th Amendment Plus” and that Tamil aspirations have outgrown this clause. The communication from Jaishankar appeared to also be for them.