India to provide Rs 7,592 crore credit line to Sri Lanka for procurement of food, other essentials

Finance Minister Nirmala Sitharaman and External Affairs Minister S Jaishankar met Sri Lankan Finance Minister Basil Rajapaksa

India on Thursday extended a Line of Credit of $1 billion (Rs 7,592 crore) to Sri Lanka to help the cash-strapped island nation to buy food, medicines and other essentials.

New Delhi extended the credit facility to Colombo just a day after the Indian Navy sent five sailing vessels to Sri Lanka, where India of late crawled back much of the strategic space it had lost to China over the past few years. The visit by the Indian Navy vessels are aimed at providing ocean sailing training to the Sri Lanka Navy personnel.

Finance Minister Nirmala Sitharaman had a meeting with his Sri Lankan counterpart Basil Rajapaksa in New Delhi on Thursday. External Affairs Minister S Jaishankar was also present in the meeting. They witnessed the signing of the agreement by the officials of the State Bank of India and the Sri Lankan government for extension of the $1 billion credit line to the island nation.

“Neighborhood First,” Jaishankar posted on Twitter, referring to the policy of Prime Minister Narendra Modi's government to prioritise India's relations with the neighbouring nations. “India stands with Sri Lanka. US $1 billion credit line signed for supply of essential commodities. Key element of the package of support extended by India”.

The SBI's $1 billion credit line to Sri Lanka was preceded by another one by the Export-Import Bank of India (Exim Bank), which had extended a credit of $500 million for the Indian Ocean nation's government to help it purchase petroleum products from India.

New Delhi is providing the credit lines to Sri Lanka to help it recover from the economic crisis caused by the measures put in place to contain the Covid-19 pandemic. India also recently took two other initiatives to bail out Sri Lanka – extension of the $400 million to Sri Lanka under the SAARC currency swap arrangement and deferral of Asian Clearing Union settlement of $515.2 million by two months.

President Gotabaya Rajapaksa's government in Colombo also initiated talks with the International Monetary Fund (IMF) for a package to bail out the country's economy from the worst crisis in its history since its independence from the British Empire in February 1948.

Sri Lanka is one of the South Asian nations which China has been eyeing to expand its geopolitical influence in the Indian Ocean region and to build strategic assets to encircle India.

The second of Mahinda Rajapaksa's two consecutive terms in the office of the President of Sri Lanka between 2005 and 2015 had seen China expanding its footprints in the island nation, causing much unease to India. He had ignored the security interests of India and allowed China to develop strategic assets, like Hambantota Port, in the island. China’s debt-trap diplomacy had succeeded in making Sri Lanka give it the Hambantota Port on lease for 99 years.

After Gotabaya Rajapaksa was elected the President and Mahinda Rajapaksa returned to power as Prime Minister in November 2019, Sri Lanka’s drift towards China regained momentum. The government led by the Rajapaksas scrapped a trilateral treaty Sri Lanka earlier signed with India and Japan for development of the East Container Terminal of the Colombo Port, apparently at the behest of China. It also got Sri Lankan Parliament pass the Colombo Port City Economic Commission Bill, which drew flak for allegedly allowing China to set up a colony in the Indian Ocean island nation undermining the sovereignty of the country. New Delhi is concerned over the CHEC Port City Colombo as it could eventually be turned into an overseas colony of China – less than 300 kilometers away from the southern tip of India.

New Delhi’s quiet and painstaking diplomacy with Colombo, however, paid off with India getting some success in clawing back the ground it lost to China in the Indian Ocean. Sri Lanka awarded the contract for the West Container Terminal to Adani Group of India in September 2021.

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