Sri Lanka economic crisis: India is materialising the idea of working minilaterals and the concept of multipolarity. While the orthodox geopolitical thinkers are hooked on the confrontation between the US and China for global dominance and purported cold war rivalry, many nations are stepping up their geopolitical roles.
They are displaying the reality of a changed geopolitical order, now everything can’t be conveniently categorised into camps. Instead, India is forming minilaterals with a specific aim. It is not getting bogged down in any rigid definition. Plus, India doesn’t need validation from either camp. This is glaringly visible as India is itself emerging as a dominant geopolitical player in the Global South and rightfully setting the agenda.
Sri Lanka economic crisis: India, France and Japan unite to help Sri Lanka
On account of its deep pockets, China extended loans with the evil design that naive smaller nations will not be able to get out of its debt trap. But it forgot that there are nations like India that will rise to the occasion and tackle these evil plans of CCP. Well, for the last year or so, India has increased its efforts to save several of the debt ridden nations.
On this line, India has been extending every possible help to get Sri Lanka out of its economic mess. On 13th April, Finance Minister Nirmala Sitharaman joined her French and Japanese counterparts and announced the debt restructuring process for Sri Lanka.
On the sidelines of the annual spring meetings of the World Bank and the IMF in Washington, the Finance Ministers of these three creditor countries held a press briefing.
Earlier, the IMF had confirmed the agenda of this meeting. Back then, the IMF had said, “Japan, India, and France will hold a press briefing on Thursday on the margins of the Spring meetings to announce the launch of the debt restructuring negotiations process on Sri Lanka.”
An official statement stated that the three creditor countries have been working closely for a coordinated debt restructuring for Sri Lanka and economic crisis.
Japanese Finance Minister Shunichi Suzuki, French Finance Minister Bruno Le Maire joined Ms. Sitharaman during the press briefing. Sri Lankan President Ranil Wickremesinghe and his state Finance Minister Shehan Semasinghe also joined the in-person live streaming.
IMF’s package to Sri Lanka
The Washington-based global lender, the IMF, had set a condition before Sri Lanka could get a $2.9 billion bailout package. To get through the bailout package, Sri Lanka needed debt restructuring from its creditors.
The IMF’s Executive Board approved an extended arrangement for Sri Lanka. The arrangement is for 48 months and under the Extended Fund Facility (EFF). The amount approved is SDR 2.286 billion (about $3 billion). The approval came after financing assurances from the creditors.
After receiving the first tranche of the $3 billion bailout programme, Sri Lanka made a payment to pay back an Indian line of credit. Sri Lanka had obtained this line of credit early last year.
Sri Lanka’s Finance Minister, Mr. Wickremesinghe, spearheaded the IMF negotiations.
He thanked Ms. Sitharaman, the Indian Finance Minister, in particular for her assistance in supporting his government with the IMF for the bailout.
On account of its lack of foreign exchange reserves, Sri Lanka had an unprecedented financial and economic crisis in 2022. This was the worst economic crisis since the independence of Sri Lanka from Britain in 1948. This had led to a serious political and humanitarian disaster on the island nation.
After extensive discussions, the IMF approved the bailout package to Colombo. This was the 17th bailout package in the independent history of Sri Lanka.
India spearheading Debt restructuring framework
As stated above, India, alongside Japan and France, announced debt restructuring plans for Sri Lanka. Apart from that, India has been supporting debt-ridden nations like Sri Lanka in multilateral groupings like the G-20. India led the G-20 Finance Ministers meeting to develop a consensus for a debt restructuring framework.
Contrary to that, China has been giving Sri Lanka the cold shoulder on the issue of debt restructuring. The ongoing debt restructuring push by India is primarily targeted at China. In the Indo-Pacific region, India has been doing everything possible to increase India’s soft power in island nations. Its aim is to ensure that China doesn’t get an unassailable advantage in these nations. India wants to keep Chinese influence in check, so that China can’t pit these nations against India.
Earlier, India defeated China in the ongoing shadow boxing match in Sri Lanka. Back in January, India became the first nation to support IMF assistance for Sri Lanka. India’s debt restructuring move is pushing and rattling the Chinese. After India’s move, Sri Lanka has been pressuring China to extend the same assistance as India is bringing along with its allies. Otherwise, China’s soft power will get a major blow, and more and more Sri Lankans will wake up and understand the reality of the Chinese debt trap.
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