Expert Speak Raisina Debates
Published on Jul 02, 2022 Updated 24 Days ago
Aid from India, Japan, Russia and China seems to be more viable than aid from the West as it accompanies political conditionalities.
Sri Lanka: Is a new India-centric aid group more viable than others? In the midst of daily reports of eternal scarcity, especially of fuel and medicines and food, Sri Lanka’s embattled Prime Minister Ranil Wickremesinghe’s announcement on planning a donor conference with India, China, and Japan has not received the required media space. With his earlier proposal for an IMF-centric ‘aid consortium’ likely to face hurdles owing to the West’s overbearing approach to human rights issues targeting Sri Lanka, another India-centric Asia grouping may hold the answer with China, Russia, and the West chipping in, too. “We need the support of India, Japan, and China who have been historic allies. We plan to convene a donor conference with the involvement of these countries to find solutions for Sri Lanka's crisis," PM Wickremesinghe told the Parliament recently, adding that negotiations with the vising International Monetary Fund (IMF) team too had gone well. However, the anticipated IMF conditionalities can have implications on the social, political, and internal security fronts.

Debt restructuring required

Independently, the government has “started talks on a debt-restructuring framework” which they hope will be completed in July., With Sri Lanka defaulting on US$ 51 billion in foreign debt, some top-line creditors, including Amundi Asset Management, BlackRock, HBK Capital Management, Morgan Stanley Investment Management and T. Rowe Price Associates have formed a group for negotiations.  “The group is broadly representative of Sri Lanka’s bondholder base, both by type of institution and by geography,” they said in a statement.

We plan to convene a donor conference with the involvement of these countries to find solutions for Sri Lanka's crisis," PM Wickremesinghe told the Parliament recently, adding that negotiations with the vising International Monetary Fund (IMF) team too had gone well.

In the midst of it, Hamilton Reserve Bank Ltd, a US bond-holder based in the Caribbean Island, St Kitts & Nevis, has since filed a suit in New York federal court, seeking full payment, including interest. It has charged Sri Lankan government leaders, including the Rajapaksa family, with fiscal irresponsibility and corruption, and has alleged bias in the government’s decision to repay domestic debts with interest, when due. The unmentioned concern in Colombo is if the Hamilton Reserve case was only to protect the bank’s commercial interests or if there was more than meets the eye. It is especially in terms of American political pressure for Sri Lanka to yield on multiple issues, like the ‘China factor’, UNHRC probes, and the unmentioned expectation for Gotabaya to quit—which he has vowed not to do but with a promise not to seek a second term.

Targeted aid

In his Parliament speech, Prime Minister Wickremesinghe also reiterated that Sri Lanka will be also  seeking help from the United States (US). This was followed by the scheduled visit of a US delegation for aid-talks, after which President Joe Biden, announced an additional US$ 20 million at the G-7 Summit in Germany. In what could be termed as ‘targeted aid’, the US assistance would go to fund the nutrition programme for over 800,000 children and ‘food vouchers’ for 27,000 pregnant and lactating women over the next 15 months. It would also support about 30,000 farmers to increase food production in vulnerable communities. As if on cue, envoys of European Union (EU) nations based in Colombo called on President Gotabaya, urged him to consider them as ‘friends of Sri Lanka’ and promised assistance in the midst of the current economic crisis. After talks with Russian Ambassador Yury Materiy, former President Maithripala Sirisena said that Moscow had offered to ‘play a critical role in solving the fertiliser and fuel shortages’.

Envoys of European Union (EU) nations based in Colombo called on President Gotabaya, urged him to consider them as ‘friends of Sri Lanka’ and promised assistance in the midst of the current economic crisis.

The government has also despatched separate ministerial teams to Russia and the United Arab Emirates (UAE), to seek fuel supplies on concessional terms, following not-so-favourable western responses to the repeated open appeals of President Gota and Prime Minister Wickremesinghe, for immediate help. This was after Prime Minister Wickremesinghe clarified that he was not against obtaining oil from Russia, which had supplied 90,000 tonnes of crude at one go, before the controversial court-ordered arrest of an Aeroflot commercial aircraft at Colombo strained bilateral relations recently.

‘One China’ policy

Wickremesinghe has said that the government would discuss debt-restructuring with China, one of Sri Lanka’s controversial aid-givers in the decade after the conclusion of the ethnic war in 2009. In discussions with Hu Wei, China’s deputy ambassador, he also reaffirmed his nation’s continued adherence to ‘One China’ policy, which is an anathema to the US-led West as they continue backing Taiwan to the hilt, in political and military terms. Yet, there is no specific or immediate commitment from Beijing on either debt-restructuring or substantive additional aid, beyond what remains in trickles. It is unclear if it has to do with Premier Li Keqiang’s delayed acknowledgement that the Chinese economy had suffered, has recovered to some extent, though the foundation is not solid—or, if there are also political reasons, too, as possible in the case of the West.

Prime Minister Modi also flagged the Sri Lankan food crisis along with that in Afghanistan at the more recent G-7 summit in Germany, but no substantive conclusions seem to have been arrived at.

The same is the case with Japan, another long-term ally, Wickremesinghe had mentioned, from the Asia region. As may be noted, aid from Tokyo has remained in low millions against the requirements. Likewise, there is no visible forward movement in the decision of Prime Minister Modi and his Japanese counterpart Fumio Kishida, taken on the side-lines of the mid-May Quad summit at Tokyo, for the two nations to ‘come together to …to aid Sri Lanka’. Prime Minister Modi also flagged the Sri Lankan food crisis along with that in Afghanistan at the more recent G-7 summit in Germany, but no substantive conclusions seem to have been arrived at. Sri Lanka needs to be hopeful about the mid-May G-7 announcement on debt-relief. Details will be known when negotiations commence.

India’s unwavering support

It is in this overall background the recent Colombo visit of India’s new Foreign Secretary Vinay Kwatra—his first overseas outing after assuming office—needs to be viewed. After separate, non-political discussions with President Gotabaya and Prime Minister Wickremesinghe, Secretary Kwatra said, “India will extend fullest support”. Apart from addressing immediate requirements, “Both sides highlighted the importance of promoting India–Sri Lanka investment partnership including in the fields of infrastructure, connectivity, renewable energy, and deepening economic linkages between the two countries,” a statement from the Indian High Commission in Colombo said. In context, Indian investors would be concerned about the avoidable controversies attending on recent investment proposals by the Adanis, the nation’s fastest-growing private sector conglomerate, with interests in infrastructure, including port and power sectors, amongst others. How the host government works on it will be watched by other nations and their investors, too, given they too are all in the long haul.

Human rights hiccups

India feels the moral and neighbourhood responsibility to help Sri Lanka,  more so with cooperation from as many nations as possible. New Delhi should also be alive to the possibilities of the West’s political conditionalities on the human rights front, especially in relation to multiple UNHRC resolutions and their follow-ups, and their unmentioned expectations for Gotabaya to quit as President.

Indian investors would be concerned about the avoidable controversies attending on recent investment proposals by the Adanis, the nation’s fastest-growing private sector conglomerate, with interests in infrastructure, including port and power sectors, amongst others.

Despite Colombo’s past claims that the nation had won the ‘war on LTTE terrorism’ with multiple contributions unlikely partners in India on the one hand, and China and Pakistan, on the other, apart from inputs from the US, direct cooperation between New Delhi and China in the present context may sound utopian. The alternative could be for Colombo to get together a new Asian group of donors and investors, involving Sri Lanka’s Southeast Asian friends and some of the West Asian nations that had turned cold after the Rajapaksa regimes’ handling of the nation’s Muslim minority—with India as the fulcrum, and Japan, Russia, and the US, all chipping in, directly or otherwise. Of course, the Gulf states may require more than Colombo’s oral guarantees on the safety and welfare of the nation’s Muslims. Whether they would see India’s very presence on the grouping as adequate guarantee to leverage viz Colombo, now and later, is a question for which there are no ready answers. Yet, this one may be more workable and functional than the IMF-centric ‘aid consortium’, both owing to the conditionalities and the western hype on human rights, both of which have consequences for Sri Lanka and Sri Lankans over the short, medium, and long terms. It is more so after anti-government protestors, in a ‘retaliatory attack’ on 9 May, allegedly took the life of one government MP and also set ablaze the homes of 78 ruling party leaders. Sri Lankans would still have to be prepared for a trim on fiscal and economic fronts, yes. But on the human rights issue, India and Japan, China and Russia, not to leave out the Gulf states, hold near-similar views, and that is one concern less for the rulers in Colombo.
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