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India scrapes through lost background to China in Sri Lanka

India is now leveraging its geographical advantage to counter China’s moves in Sri Lanka while extending much needed credit lines to purchase fuel and essential food commodities.


Sri Lanka will enter into two credit lines – one from India for US $ 1 billion and another from Australia for $ 200 million to purchase essential food items to ensure availability of supplies for the upcoming National New Year and the following six months, Trade Minister Bandula Gunawardena said.


The two credit lines will be sufficient for the imports of essential items including rice, dhal, medicines and other commodities, he claimed. 

The Credit line from Australia was mainly to buy lentils and barley and the rest could be used for other essentials while the Indian Credit line would cover imports of onions, potatoes, dhal and medicines.

India reached out to help to save its neighbor from drowning in darkness. According to the Indian High Commission in Sri Lanka, New Delhi has offered Colombo $500 million to purchase petroleum products as it stares at a potential country-wide blackout due to fuel shortage.

India’s aid came at an opportune moment. This assistance comes over and above the credit previously pledged by India to assuage Sri Lanka’s economic woes.

The two countries had come up with a “four-pronged” plan that comprised lines of credit for fuel, food, and medication imports, currency swaps and debt deferrals from India to Sri Lanka, and the completion of the Trinco-oil farms project.

India extended a $900 million loan and another $1.5 billion for two credit lines to help Sri Lanka purchase food and fuel.

Nevertheless, the Indian aid came at a moment when Sri Lanka desperately needed it and helped it decide whether it could afford to make the repayment or not.

The island nation is currently facing its worst economic crisis in history which includes a credit crunch, a drop in GDP due to COVID-19 losses in tourism, exports, and remittances.

It is also grappoing with dwindling foreign reserves from $7.5 billion in 2019 to $2.6 billion in January 2022 after the payment of $ 500 International Sovereign Bond(ISB), and looming debt repayments of around $7 billion in 2022. While it has paid the current debt, there’s another payment due in July this year.

However, in the worst of times for Sri Lanka, India seems to have redeemed itself against China. While Beijing hinges its Belt and Road Initiative (BRI)hopes on Colombo for its Indian Ocean Rim (IOR) forays, its lukewarm response to Colombo’s appeal for help certainly sends the wrong signal.

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