Interview: India's role and the way forward in Sri Lankan crisis

Hyderabad: Former High Commissioner to Sri Lanka Nirupama Rao, in an exclusive interview with Eenadu's Telangana Bureau Chief ML Narasimha Reddy, explains India's role in maintaining stability amid the contingency arising out of neighbouring Sri Lanka's economic crisis and the lessons we can learn. Here is the full interview...

What is the root cause of the Sri Lankan economic crisis?

The crisis has been in the making for some years although developments in Sri Lanka have been very dramatic since the end of March 2022, when the public protests against the Rajapaksa regime became a movement spread over all classes of society.

For much of its independent existence since Sri Lanka, financial governance by the State has been characterized by budgetary and current account deficits. The production base of the economy has not been diversified to embrace new and cutting-edge industries and digital services despite the country having the highest human capital index in South Asia.

The reliance on tourism and remittances from migrant workers in the Gulf region for foreign exchange earnings, as well as a predominant reliance on tea and garment exports, which are all vulnerable to geopolitical risk and instability has also cost the country dearly.

In the last few years, the Easter 2019 ISIS bombings, followed by the COVID-19 pandemic have accelerated the economic decline. Disastrous government policies like the reduction in taxes as well as the ban on chemical fertilizers and pesticides have reduced cash reserves as well as drastically impacted food production. Sri Lanka is no longer able to feed itself as a result.

What should be India's concerns over the economic power that China wields over the island nation?

Sri Lanka is a strategically important country, like a sentinel, situated as it is on the cross-roads of key sea lanes of navigation and commerce in the Indian Ocean. For India, particularly, which really speaking, is Sri Lanka’s only neighbour separated from it by just a few miles of the Palk Strait, instability in the country has significant ramifications.

The state of Tamil Nadu for instance has a coast-line of over 1000-kms. that is directly contiguous to Sri Lanka. Refugee flows from Sri Lanka, if the situation further deteriorates, and the poorer sections of the population are in misery because of food shortages particularly, are a contingency that we should not ignore.

There have been recent media reports of separatists owing allegiance to the LTTE trying to regroup and take advantage of the current situation in Sri Lanka to pursue their agenda of terrorism and violence so as to deepen the rifts between the Sinhalese and Tamil communities. Our security agencies have to be constantly vigilant on this front.

While we obviously cannot dictate the politics within Sri Lanka, we must be constantly alert to the activities of countries like China who are already active within that country, and who seek more power and influence in the region. 10% of Sri Lanka’s external debt is owed to China.

Chinese projects like the Hambantota port development and the Mattala airport have been dubbed ‘vanity’ projects for the Rajapaksas that have yielded little to benefit the people of the country or the economy. The 99-year lease given to China in Hambantota has also elicited protests about the abandonment of Sri Lankan sovereignty.

There are also many unanswered questions about the nature of Chinese investment and management of the Colombo Port City project. Chinese diplomacy in Sri Lanka has acquired an image of being more extractive than beneficial to the people.

How Sri Lanka can wade through this mess?

The challenge before the government of Sri Lanka is to — first and foremost, deal with the economic crisis and ensure the political consensus that is required to deal with the situation, particularly the pain that is being experienced by the poorer sections of the population.

There is a need to restructure Sri Lanka’s foreign debt repayments —a big tranche is due in July—and also to work with organizations like the IMF on making this debt more sustainable, and be able to access the credit that is required for crucial life-sustaining imports like food, fuel and medicines.

The new, but veteran, Prime Minister Ranil Wickremesinghe cannot afford to ignore the nation-wide demands for the stepping-down of President Gotabaya Rajapaksa who is seen as having betrayed the national cause through flawed and misconceived policies and incompetent governance and ending the executive presidency.

The entire Rajapaksa family is seeing a total eclipse of their fortunes. They are regarded as having robbed the country through both personal corruption and the greed of their lackeys and favourites. The need of the hour is for the new Prime Minister to put together an A-team of policy professionals and politicians who put the nation’s interests above their own so that crisis-management is effective and a way forward is charted that can literally salvage the situation.

It will not be easy, and it is likely that the people of Sri Lanka are going to see straitened circumstances in the near and mid-term. This crisis cannot be solved overnight. The next five years are going to be challenging but with sensible governance the situation will improve.

Why aren’t many countries coming forward to support the island nation?

The resignation of Mahinda Rajapaksa as Prime Minister, and the appointment of Ranil Wickremesinghe as the new head of government has been largely welcomed internationally, especially be leading Indo-Pacific powers like the United States and Japan for instance.

Many of these countries have an interest in ensuring stability in Sri Lanka and assistance is bound to be forthcoming as the need of the hour is help for the people of Sri Lanka especially those sections that face dire straits because of the collapse of the economy and severe shortages. There will be help from the United Nations agencies too.

India has been the first responder in this situation. We have provided $ 3 billion in two Lines of Credit for fuel, food, medicines and other essentials. Furthermore, $ 2 billion has been made available as deferrals of payments from the Central Bank of Sri Lanka to the RBI under the Asian Clearing Union and as currency swap. India has reaffirmed that it stands with the people of Sri Lanka in this crisis and will continue to assist them.

What is our lesson from the Lankan crisis?

Our neighbourhood policy has to factor in scenarios of economic collapse in our region, the humanitarian fall-out of such a collapse, be alert to how such a situation can be taken advantage of by our geopolitical rivals, and how we must pursue more regional integration that can promote GDP growth and economic progress.

Most importantly, we must always keep the people of the region at front and centre of all that we do in policy-making and execution as far as the neighbourhood is concerned. We must be firm advocates of good governance, of socio-economic development, of democracy against authoritarianism, and promote inter-ethnic and inter-religious harmony so that the strength and durability of constitutional democracy is never threatened.

You served as the Indian High Commissioner to Sri Lanka and later as the Indian Foreign Secretary. What is your experience with the country and the government?

Even prior to my term as High Commissioner in Sri Lanka, I served as First Secretary in the Indian High Commission from 1981-1983. Sri Lanka is linked to us through geography, history, religion and spirituality, language and ethnic ties. As Gandhiji said, it is impossible for India and Sri Lanka to quarrel.

We are like family. The Sri Lankans are a proud and independent people and we must respect that always. Having a giant neighbour like India can be somewhat overwhelming for a country like Sri Lanka. So, we must respect that factor and treat the country with sensitivity and forethought.

Strategically, Sri Lanka is a vital and crucial country and therefore, we must always work to ensure its stability, its independence, sovereignty and territorial unity. In the long run, infrastructural connectivity between India and Sri Lanka can help Sri Lankans economically and be a big step to regional economic integration within South Asia and the Bay of Bengal community.