Colombo has asked New Delhi for a debt moratorium and an additional currency swap
Prime Minister Narendra Modi will hold discussions with his Sri Lankan counterpart Mahinda Rajapaksa on September 26 in India’s first virtual summit in the neighbourhood, even as Colombo awaits New Delhi’s decision on its request for a debt moratorium and an additional currency swap.
“Yes, the meeting is confirmed,” Rohan Weliwita, media secretary to Mr. Rajapaksa, told The Hindu on Monday. The meeting will come two days after a scheduled virtual meeting of foreign ministers of the two countries, along with other regional counterparts, at the SAARC foreign ministers’ forum on September 24.
The virtual summit is the first official interaction between the leaders after they met in New Delhi in February this year. They have since spoken at least twice over the telephone though. Mr. Rajapaksa’s request at the February meeting for a debt moratorium of three years from New Delhi, to help Sri Lanka manage its fragile economy, is pending, as is Sri Lankan President Gotabaya Rajapaksa’s request to Mr. Modi – during a telephone call in May – for a “special” $1.1-billion currency swap facility. Official sources in Colombo said both are “being discussed,” while in July, the Reserve Bank of India signed a $400 million swap facility with Sri Lanka’s Central Bank.
A big challenge
Following Sri Lanka’s August general elections, the Rajapaksas have consolidated political power with an impressive two-thirds in Parliament. However, they face one of the nation’s biggest economic challenges yet, with the global pandemic only heightening it. Sri Lanka is due to repay outstanding loans amounting to nearly $3 billion this year, including a non-negotiable $1 billion sovereign bond maturing next month.
While the official agenda of the ‘virtual summit’ is not known, issues of bilateral interest, including development projects and cooperation in the response to COVID-19, are likely talking points.
In particular, the leaders are expected to discuss the contentious East Container Terminal project at the Colombo Port, which India agreed to jointly develop with Japan and Colombo, signing a Memorandum of Cooperation with the former government. However, the Rajapaksa administration is yet to give the proposal a thumbs up, after worker unions and nationalist groups protested “foreign involvement” in their “national assets.” While those resisting the move recognise that over 70% of the transhipment business at the terminal — located near the China-backed ‘Port City’ in Colombo — comes from India, they are wary of the Adani group’s reported interest in the deal.
Sri Lanka’s Tamil polity will keenly follow the summit to see if Colombo’s commitment to implement the 13th Amendment — which devolves a measure of power to the provinces — is discussed, as some in the Rajapaksa administration, including prominent ministers, are consistently calling for the abolition of provincial councils that were created following the Indo-Lanka Accord of 1987.
Amid criticism of India’s neighbourhood policy, marked by heightening tensions and hostility with many partners, New Delhi has been stepping up its neighbourhood outreach. Mr. Modi and External Affairs Minister S. Jaishankar have been swiftly connecting with the Sri Lankan leadership, especially after the Rajapaksa brothers’ big win in the November presidential and August general elections. Mr. Modi was the first leader to wish Mr. Mahinda Rajapaksa in August, well before the final poll tally was known. Colombo has sought to reciprocate, going by the optics. Both President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa wished Mr. Modi over the phone on his birthday last week.
Following the global pandemic, India held its virtual summit in June, with the aim of continuing diplomatic engagement with its partners. The first summit between Mr. Modi and Australian Prime Minister Scott Morrison saw nine agreements emerge, while the two countries issued a joint declaration on a ‘Shared Vision for Maritime Cooperation in the Indo-Pacific.’
India and Japan were expected to hold a summit early this month, but that did not happen in the wake of Prime Minister Shinzo Abe’s resignation.