As the world navigates the uncertainties of the Covid-19 pandemic, virtual meetings between nations have become a common occurrence. In a recent noteworthy instance, India and Sri Lanka held an online meeting attended by officials from both countries’ Ministries of External Affairs and Finance, along with representatives from the Sri Lankan government and the Export-Import (Exim) Bank of India.
Key Points of Discussion
The meeting had several key outcomes. Most notably, the Reserve Bank of India agreed to provide a USD 400 million currency swap facility for Sri Lanka until November 2022. This initiative aims to boost the country’s foreign reserves, ensuring its financial stability during these challenging times.
Currency swaps are usually employed to obtain foreign currency loans at more favorable interest rates. They are a crucial financial tool for central banks and governments to meet short term foreign exchange liquidity requirements or to ensure adequate foreign currency to avoid Balance of Payments (BOP) crisis.
Debt Repayment Rescheduling
This decision came in the wake of earlier discussions that took place five months after the visit of Sri Lanka’s Prime Minister Mahinda Rajapaksa to New Delhi. The focus of these discussions was on rescheduling Colombo’s outstanding debt repayment to India. The amount that Sri Lanka owes to India stands at USD 960 million.
Economic Collaboration Webinar
Another significant event was a webinar on ‘Deepening Economic Collaboration between India and Sri Lanka’. Organised by the Federation of Indian Chambers of Commerce and Industry (FICCI) in association with other institutes, this digital event saw participation from government and industry representatives from both countries.
Sri Lanka highlighted issues related to non-tariff barriers in receiving countries, which pose difficulties in market access. Non-tariff barriers include quotas, embargoes, sanctions, and levies, which can restrict trade.
Current India-Sri Lanka Relations
Sri Lanka has been maintaining a neutral stand regarding the ongoing conflict between India and China. Additionally, no final decision has been made on the East Container Terminal (ECT) project at the Colombo Port, despite widespread protests alleging the Sri Lankan Government of conceding national assets to India.
India’s proactive approach towards strengthening its ties with Sri Lanka is evident. In November 2019, India announced a USD 450 million Line of Credit to Sri Lanka. More recently, India has offered assistance to Sri Lanka in tackling Covid-19 and has also helped in the ‘Suwa Seriya’ ambulance service.
Unresolved Issues and Concerns
Despite the strong ties, several unresolved issues persist. The question of Sri Lankan Tamils continues to be a point of contention. Tamil leaders feel helpless and are appealing to India for intervention. However, given its growing geopolitical concerns in the region, a strong position from India seems unlikely.
Suggestions for Strengthening Relations
To further strengthen their relationship, both countries can explore collaborations in textiles, information technology and agribusiness, sectors where India excels. Sri Lanka should welcome Indian businesses in developing industrial zones, automotive components, pharma, textiles and engineering.
Looking Ahead
The friendly relations between India and Sri Lanka are an essential cornerstone for a peaceful and prosperous South Asia. As the race to develop a Covid-19 vaccine amps up, India could further solidify its goodwill within the neighbourhood by securing regional access to these vaccines.