China recognises India’s “great efforts” in supporting Sri Lanka during its worst economic crisis and expresses willingness to work with the Indian government and global community to counter further challenges.
- In a media briefing held in Beijing, Chinese Foreign Ministry spokesperson, Zhao Lijian, expounds on China’s humanitarian aid of about 500 million RMB, approximately $73 million, to Sri Lanka.
- He noted that the Indian government has made great efforts in this respect, stating that the nation is willing to work with India and other members of the international community to help Sri Lanka and other countries with difficulties to help these developing countries to get through this situation.
Sri Lanka’s economic crisis
Sri Lanka is experiencing its worst economic crisis since independence in 1948. It has led to extreme inflation, near-depletion of foreign exchange reserves, shortages of medical supplies and an increase in prices of basic commodities.
The crisis is said to have manifested due to multiple factors like tax cuts, money creation, a nationwide policy to shift to organic or biological farming, events such as the Easter Bombings (coordinated terror attacks on Colombo) in 2019, and the aftermath of the COVID 19 pandemic. This has led to widespread protests and even the ouster of Prime Minister Mahinda Rajapaksa, being succeeded by veteran politician Ranil Wickremesinghe.
How has India supported Sri Lanka?
India, determined to follow its Neighbors First Policy, has so far directed 1.9 billion in loans, credit lines and currency swaps and has vowed another 2 billion in swaps and support to Sri Lanka.
Since March, over 270,000 metric tonnes of rice have been supplied under the credit facility. In February, India gave Sri Lanka $500 billion as a short-term loan to help it purchase petroleum products through the Ministry of Energy and the Ceylon Petroleum Corporation on behalf of the government of Sri Lanka.
Moreover, the Reserve Bank of India (RBI) has extended a currency swap of $400 million and deferred payments owed by the Central Bank of Sri Lanka under the Asian Clearance Union worth several hundred million dollars. In April, India sent vegetables and daily ration items to Colombo and also sent ships with sugar, rice and wheat.
Last week, India directed a total of 3.3 tonnes of medical supplies to Sri Lanka. More than 25 tonnes of drugs and medical supplies which were donated by India during the last two months are valued at close to SLR 370 million.
This is in addition to the economic assistance of around USD 3.5 billion and supply of other humanitarian supplies such as rice, milk powder, kerosene etc, according to the Indian High Commission.
China’s contribution so far
Mahinda Rajapaksa, former Prime Minister, said in an interview on June 6 that Sri Lanka hadn’t yet been able to tap a USD 1.5 billion credit line from China is yet to receive a response for the request to China for a loan of USD 1 billion.
He also claimed that China appeared to have shifted its strategic focus to Southeast Asia and Africa, and was focusing less on South Asia.
In response to these remarks, Zhao Lijian said that Beijing is following Sri Lanka’s crisis and recognises its challenges stating that: "We have all along provided support to Sri Lanka's socioeconomic development as long as our ability permits. China has announced that it would provide emergency humanitarian assistance worth 500 million RMB for Sri Lanka” he claimed.
Why is it significant?
Being one of Sri Lanka’s top two bilateral creditors, along with Japan, China’s acknowledgement of Indian assistance to Sri Lanka is significant, coming amid a well-known geopolitical contest between the two in Sri Lanka.
Earlier this year, China had shown disappointment over Colombo replacing a proposal for a Chinese energy project in three islands off the northern Jaffna peninsula with an Indian project.
Despite setbacks, Mr Zhao stated that upon Colombo’s announcement on its debt default, Chinese authorities had held discussions with the Sri Lankan side to properly resolve the debts, expressing hope that “Sri Lanka will work actively with China to discuss the appropriate settlement”.
Further, Xiao asserts that China “stands ready to work with relevant countries and international financial institutions to continuously help Sri Lanka in dealing with the current circumstances and easing its debt burden to achieve sustainable development”, the official said.
Sri Lanka’s Strategy Ahead
Aside from seeking help from China and Japan, Colombo has also sought the International Monetary Fund’s help on debt restructuring and economic revival. Prime Minister Ranil Wickremesinghe, who spoke to the IMF chief on Tuesday, is urging the Fund’s team to visit Sri Lanka at the quickest to finalize staff-level agreement, his office states.
Sri Lanka needs to assess the debt it owes to private creditors and bilateral lenders.
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