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‘Lend to Rajapaksa Govt. to make SL a long-term ally’

31 Dec 2021

  • Subramanian Swamy says India should give SL $ 10 b deferred interest
  • Adds if not, China will gain one more ‘junior’ partner in the Indian Ocean
    BY Shenal Fernando Indian Bharatiya Janata Party’s (BJP) Rajya Sabha MP Subramanian Swamy on his official Twitter handle called for the Indian Government to provide Sri Lanka a $ 10 billion loan in order to ensure that Sri Lanka doesn’t become a “junior partner” of China.  “If India wants an ally for the Indian Ocean long term, then India must give deferred interest $ 10 billion loan to the Rajapaksa Government now or face China getting one more junior partner. The Modi Government has failed in so many foreign policy issues. Let not Sri Lanka be another,” stated Swamy. Such a loan would prove to be a massive boon for Sri Lanka, which is expected to pay around $ 6.9 billion in foreign currency debt service payments in 2022 and could lead to a significant shift in the geo-political landscape of the Indian Ocean. Furthermore, this statement is significant because the Government of Sri Lanka is currently in negotiations with India to acquire financial assistance to the tune of $ 1.9 billion. The financial assistance sought from India is in the form of a $ 400 million currency swap to help Sri Lanka address the existing balance of payment (BOP) issues; a $ 1 billion line of credit to cover the import of food, medicines, and other essential items from India to Sri Lanka; and a $ 500 million line of credit to cover the importation of fuel from India. It is being widely alleged that the grant of such financial assistance by India will be contingent on the Sri Lankan Government’s support of the proposed joint development of the Trinco oil tank farm involving Lanka IOC (LIOC). However, such allegations were denied by Minister of Energy Udaya Gammanpila in his recent interview with The Hindu, during which he claimed: “Some including the political opposition are suggesting that India’s economic assistance is tied to the Trincomalee deal. I vehemently deny that. We began negotiating this agreement well before the economic assistance was sought; there is no connection whatsoever.”  Sri Lanka is currently facing a severe foreign exchange liquidity crisis due to its falling reserves which had fallen to a 12-year low of $ 1.6 billion by the end of November, down 30% from October. The official reserve position of the country has since been bolstered with the announcement by the Central Bank of Sri Lanka (CBSL) on Wednesday (29) that it has acquired the ¥ 10 billion (equivalent to $ 1.5 billion) currency swap from the People’s Bank of China (PBoC). Swamy is known as a staunch supporter of Prime Minister Mahinda Rajapaksa and over the years, has continuously and publicly called for stronger and friendlier relations between Sri Lanka and India.

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