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Business News/ Opinion / Views/  Aid Sri Lanka’s economy and not Rajapaksa’s grip
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Aid Sri Lanka’s economy and not Rajapaksa’s grip

India should help Colombo get past its economic crisis for the sake of friendly ties and our regional interests. But this should be done in a way that doesn’t strengthen its leader’s power

Photo: APPremium
Photo: AP

Sri Lanka’s finance minister Basil Rajapaksa, brother of president Gotabaya Rajapaksa and prime minister Mahinda Rajapaksa, has been in talks with our foreign minister S. Jaishankar in Colombo on helping its cash-strapped economy out. Reports indicate that the island-nation has sought an additional $1 billion by way of a credit line, which would be on top of the $2.4 billion aid package it has already received from New Delhi this year. This is not surprising, given the scale of Sri Lanka’s crisis. Queues at fuel stations have lengthened as supplies run dry, long power cuts have become the norm, essential commodities are scarce and a food shortage has grown so acute that energy starvation may not be the worst its people face. The country’s coffers lack foreign exchange, with a level of $2 billion proving hard to maintain, so it is short of money to pay for key imports. As its domestic needs outweighed what others buy from it and foreign investors grew nervous, its currency lost value and retail inflation soared. Popular discontent against the Rajapaksa government has spilled onto streets in the form of protests. Instability could spring nasty surprises all around. To the extent New Delhi can extend low-cost help to alleviate the hardships of Sri Lankans, it should. But this must be done with due care.

Given Sri Lanka’s relatively high dependence on tourism, analysts have pinned some of its woes on the Easter Sunday terror attacks of 2019 followed by covid closures before it could get tourists back. But its troubles today are largely of its own making. Even pre-pandemic, it had such loose fiscal and monetary policies that economists warned prices would rise, slow commerce down and compress tax collections. Once covid snarls drove up commodity bills, it did itself no favour by barring some imports. In 2020, it had blocked inward vehicle shipments. Last year, it barred chemical fertilizers in a misguided push for organic farming that hurt its farm output (and had to be reversed). It also tried using meagre dollar reserves to prop up its rupee, a fight it lost in early March when it ran out of ammunition, devalued its currency and then let it float, only to see it fall further. With some $6 billion in foreign payments due this year, its credit ratings have been slashed. As for Chinese gift-horses of infrastructure, a timely look at their details could have shown they’d leave it more indebted than empowered.

On Monday, Sri Lanka thanked us for our assistance. Good neighbourliness has its virtues. Crucially, any disillusionment in Colombo with Beijing eases New Delhi’s effort to keep the Lankan archipelago out of China’s ‘string of pearls’ game in the Indo-Pacific. It is in our interest to contain Chinese presence and influence in this region. Yet, the optics of our aid matters too. Sri Lanka’s poor record on minority rights under the Rajapaksa clan has been under watch. So while an Indian ‘backstop’ of sorts for its economy could earn us local goodwill, a long-term asset, the relief provisions we make must not end up backing a regime whose disposition towards Tamils, among other groups, has been a cause of concern. Just a few days ago, India had to remind Colombo of its humanitarian commitments, which are broadly seen to have displayed an inverse relationship with the ruling family’s grip on power. If we nuance our approach adequately, we could make a globally-relevant point of principle: the less that people are forced to suffer the follies of their leaders, the better.

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Published: 29 Mar 2022, 10:28 PM IST
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