For India, trouble has normally come from the north and the west, rarely from the south.
But the times, as they say, are changing, with Sri Lanka, a country with deep political, cultural, and ethnic links to India, facing its worst politico-economic crisis since it came into being in 1948 as Ceylon.
Public anger against the ruling Rajapaksa family has burst out on the streets, forcing a reluctant Mahinda Rajapaksa to quit as the prime minister on May 9.
South Asia’s political families have ruled their countries for the first few decades after the British left and Sri Lanka is no exception.
The Rajapaksa family’s fall from grace has been exceptionally precipitous though. In November 2019, Gotabaya Rajapaksa convincingly won the presidential election with more than 52 percent of the vote.
A few months later, an alliance led by his elder brother, Mahinda, who was the country’s president between 2005 and 2015, won the parliamentary election, securing almost 60 percent of the vote.
It was the icing on the cake.
Since then, however, the road has been uphill. A crisis dictated by a series of inexplicable economic decisions, followed by a lack of political control, has plunged the country into chaos.
Mahinda’s resignation came three days after his brother Gotabaya reportedly asked him at a cabinet meeting to step down.
Heavily armed troops evacuated the outgoing Prime Minister from his official residence in Colombo after thousands of protesters breached the main gate.
Protesters who forced their way into the capital’s “Temple Trees” residence then attempted to storm the main building where Mahinda was holed up with his immediate family.
The question people are asking now is who will ask Gotabaya to step down? For any semblance of stability, that should be considered a must.
By all available accounts, Gotabaya is clinging to his chair, unwilling to leave, which is deepening the impasse.
"Sadly for Colombo, its economic and political troubles are intertwined. The prospects don’t look bright enough and even India’s ability to help is limited. They have to try global sources like the World Bank or the IMF but these processes take time,” says Rajiv Bhatia, former ambassador, Distinguished Fellow, Foreign Policy Studies Programme, Gateway House.
As for China helping Sri Lanka in this hour of crisis, Bhatia told Moneycontrol that Beijing, if anything, has appeared very reluctant to come to the aid of who it considers an ally.
While Sri Lanka’s outstanding debt with China is about $3.5 billion, or 10.8 percent of the total, for India, it is at 2 percent.
Time to be a friendly neighbour?
In pursuance of its “Neighbourhood First Policy”, India has, so far, committed $1.9 billion to its southern neighbour in loans, credit lines and currency swaps. New Delhi has also expressed willingness to give an extra $2 billion in currency swaps.
In the last three-and-a-half months, India has extended assistance of about $2.5 billion to Sri Lanka, including credit facilities for food and fuel.
In 2021, the Lankan government officially declared the worst economic crisis in the country in 73 years. In August 2021, a food emergency was declared, despite the government denying shortages. Energy minister Udaya Gammanpila acknowledged that the crisis could lead to a financial disaster.
Look at it anyway, it is financial mismanagement of epic proportions by the ruling party that has led to this crisis.
‘’It has been caused by multiple compounding factors such as tax cuts, a nationwide policy to shift to organic or biological farming, among others,” says former Indian ambassador to Sri Lanka, Ashok Kantha.
Contributing along the way have been tragic events like the Easter bombings in 2019 and the devastating impact of the coronavirus pandemic, with the country heavily dependent of tourism.
“Sri Lanka had been earmarked for sovereign default, as the remaining foreign reserves of $1.9 billion, as of March 2022, would not be sufficient to pay the country's foreign debt obligations for 2022, with $4 billion earmarked for repayment,” Kantha told Moneycontrol.
In April, Sri Lanka announced that it is defaulting, making it the country's first sovereign default since 1948.
The extent of the crisis can be gauged from the fact that the country has stopped external debt payments to ensure that they have enough cash reserves for emergency supplies like fuel, food, gas, medicine, and other essentials.
The country, which has been heavily dependent on external debts to run its economy, has been bailed out in the past by its competing neighbours –India and China.
It is this, according to BJP ideologue and a former editor of Organizer, Seshadri Chari, that has got Sri Lanka into trouble.
“The ‘family-owned’ political dispensation in Colombo seems to have done everything that was avoidable and invited disaster of every form. The massive infrastructure projects funded by China under the Belt and Road Initiative (BRI) may have turned out to be the tightest noose around its neck,” he told Moneycontrol.
According to him, instead of concentrating on local manufacturing, Sri Lanka opted for a growth-based strategy based on heavy foreign borrowing and spending on infrastructure, which has only helped China.In the Congress regime, the non-strategic thinking of the ruling party led to the Hambantota port slipping out of India’s hand and going to China in 2005. But, he believes, things are changing and that India should now go out of its way to help Sri Lanka to restore balance or shall we say strategic balance?