Sri Lanka’s economic emergency provides an opportunity for India to counter the influence of China in South Asia. Explain (200 Words)
Refer - Business Line
Enrich the answer from other sources, if the question demands.
IAS Parliament 3 years
KEY POINTS
· Sri Lanka is on the edge of the precipice even as it just managed to ward off a sovereign default a few days back.
· It paid off $500 million due on sovereign bonds from its reserves of just over $3 billion. These reserves, which include a currency swap in Chinese currency amounting to $1.5 billion, are now barely enough to cover 45 days’ imports.
· Amid fears of an imminent sovereign default Sri Lanka must service $7 billion outstanding debt in 2022 pressure is being brought on the government to approach the IMF for a relief package.
· Besides China, which has arguably ensnared (some would say ‘colonised’) Sri Lanka in a debt trap by building its Hambantota port, South Korea and Bangladesh are involved in extending credit lines and debt restructuring.
· India was initially neutral to Prime Minister Mahinda Rajapaksha’s public appeal for a three-year debt moratorium during his visit to New Delhi in February 2020.
· India is probably justified in being miffed over the current Sri Lankan dispensation’s tilt towards China, but the best way to correct that will be by stepping in to help the island nation in its hour of need.
