By Eranda Wanigasekara
Sri Lanka has turned to its immediate neighbour India for economic help as the island country struggles with paying back Chinese loans. As there are high possibilities of a ‘debt trap’ over the failure of Chinese loans, Colombo has sought help from India.
Sri Lanka cannot afford to be completely dependent on China, which not only places the country at economic risk but can hurt its interest in the wake of rising Indian ambitions and the formation of the United States-led Quadrilateral Security Group (QUAD).
Sri Lanka is reported to have received loans worth USD 5 billion from China for the construction of roads, ports and airports.
However, the Covid-19 led disruption affected the country’s ability to pay back the loan. Thus, Colombo in January asked Beijing to restructure its debt. This is one of the major reasons for sentiments to go against China.
The tourism-dependent economy, which was crippled by the foreign exchange crisis, was seen struggling to pay off even fuel imports bill. In such a scenario, paying off Chinese loans — USD 1.5- 2 billion in 2022– would be beyond its capacity, say international rating agencies. Sri Lanka asked China to restructure the loan. But Beijing smartly rejected the request. “Sri Lanka will surely overcome the temporary difficulties as soon as possible,” remarked Chinese Foreign Ministry Spokesperson Wang Wenbin. The ambiguity led to alarm bells ringing in Colombo as China has taken important and strategic projects like the Hambantota port, a 17-km elevated highway, 88 hectares of the Colombo Port City (CPC) and 27-km railway line on lease. And non-payment of loans may cause Sri Lanka to lose these projects as well as a part of the country’s sovereignty to China.
Growing Chinese interests and influence in Sri Lanka have been issues of serious concern for India as it considers it a security threat. In the wake of border conflicts between the two Asian giants up on the Himalayas and the widening rift between the US and China, it would be a great risk for Sri Lanka to be seen on Chinese side. Colombo would not want its foreign policy misaligned and tilted. The western block and QUAD group except India have taken a stand against Sri Lanka at the United Nations Human Rights Commission (UNHRC) over human rights violation of Sri Lankan Tamils. Being seen too close to China can make things murkier for Sri Lanka. There are other reasons too. India and the US gave 13.5 million and 3.4 million Covid-19 vaccines to Sri Lanka respectively, besides other medical assistance.
Sri Lanka now is moving away from China while getting close to India. Sri Lanka’s foreign minister GL Peiris said that Colombo was committed to special relations with New Delhi. India recently has offered Sri Lanka loans worth USD 912 million as well as additional assistance of USD 1.5 billion for two credit lines involving the purchase of food and fuel from India. The Indian help has come to rescue Sri Lanka when it did not have sufficient funds to foot the import bills. Sri Lanka’s High Commissioner Asoka Milinda Moragoda has invited India to invest in Sri Lankan infrastructure projects like ports, infrastructure, energy, renewable energy, power and manufacturing. Following the virtual encroachment on the Hambantota port, concerns about China are growing in Sri Lanka. “Given the nature of the power play in this region, Chinese presence can be looked at differently. In that context, I think our dialogue with India is what is important – to build trust and to understand each other,” Moragoda said.
New Delhi has elated for reclaiming the space it had lost to China in recent years. India has tried to connect with Buddhist monks in Sri Lanka, who were not in favour of India earlier due to ethnic issues in Sri Lanka. Buddhist monks have opposed the Chinese infrastructures saying they would never allow a “Chinese colony” in their country. India had in 2020 pledged the support of USD 15 million for the promotion of Buddhist ties with Sri Lanka. In mid-February, India sent 40,000 tonnes of fuel to Sri Lanka, which helped the island country to counter the energy crisis. So, the financial aid, pressure of the US-led group of countries and India using cultural connect appear to have helped India in building up positive opinion in Sri Lanka. This has however angered China. During his latest visit to Sri Lanka, Chinese Foreign Minister Wang Yi retorted that no “third party” should interfere in the “friendly relations” of the two countries. His barb was aimed at India. Chinese media has been blaming India and the US for painting a negative picture of China in Sri Lanka.