Sri Lankan finance minister Basil Rajapaksa meets PM Narendra Modi amid Sri Lankan economic crisis  

India likely to assist Sri Lanka with a $1 billion emergency support along with loan deferment, credit for fuel imports and RBI currency swap

March 16, 2022 02:30 pm | Updated March 26, 2022 11:02 am IST - COLOMBO

Sri Lankan Finance Minister Basil Rajapaksa with Prime Minister Narendra Modi in New Delhi Wednesday. Sri Lanka’s High Commissioner to India Milinda Moragoda is on left.

Sri Lankan Finance Minister Basil Rajapaksa with Prime Minister Narendra Modi in New Delhi Wednesday. Sri Lanka’s High Commissioner to India Milinda Moragoda is on left.

Sri Lanka’s Finance Minister Basil Rajapaksa met Prime Minister Narendra Modi in New Delhi Wednesday morning to discuss bilateral matters and further Indian assistance to the island nation which is in the grips of an extraordinary economic crisis.

Sri Lanka’s High Commissioner to India Milinda Moragoda was present at the meeting.

It is widely expected that India will clear a further $1 billion emergency financial support that New Delhi and Colombo have been negotiating since Mr. Rajapaksa’s last visit to New Delhi early in December.

At that time, he held talks with External Affairs Minister S. Jaishankar and Finance Minister Nirmala Sitharaman, where both sides agreed on a “four-pronged” approach to addressing Sri Lanka’s meltdown, that included Indian credit lines for import of essentials such as food , medicines and fuel; currency swap to help boost Sri lanka’s foreign reserves, an “early” modernisation project of the Trincomalee oil tank farm, and Colombo’s commitment to facilitate Indian investments in Sri Lanka.

Since January last, India has extended $1.4 billion support, by way of a $400 million RBI currency swap, a $500 million loan deferment, and a $500 million Line of Credit for fuel imports. The additional $1 billion, if cleared, will bring some relief to Sri Lanka, amid its current fuel and gas shortages, and soaring prices of food and other basic items.

Signing of key agreements

Between Mr. Rajapaksa’s two New Delhi visits in a span of four months, India and Sri Lanka signed key agreements, both at governmental levels and involving private Indian investors. On January 6 last, Indian Oil Corporation subsidiary Lanka IOC, Ceylon Petroleum Corporation and the Government of Sri Lanka signed three agreements to jointly develop the Trincomalee oil tank farm in eastern Sri Lanka.

On March 11, the National Thermal Power Corporation (NTPC) signed an agreement with the Ceylon Electricity Board (CEB) to jointly set up a solar power plant at Sampur in Trincomalee. The same day, the Adani Group signed a deal for setting up two renewable energy projects in northern Sri Lanka, at an estimated cost of $500 million, though this agreement was not publicised by either side.

Discuss many issues

A statement issued by the Sri Lankan High Commission in New Delhi said Mr. Modi and Mr. Rajapaksa discussed a range of bilateral interests, including agriculture, fisheries, tourism, and sustainable energy.

“The Prime Minister and the (visiting Sri Lankan) Minister discussed Sri Lanka’s decision to move towards organic agriculture. Prime Minister Modi highlighted the advantages of natural farming and India’s experience in developing related techniques and products, including nano-fertilizers, which could be of relevance to Sri Lanka,” the statement said. 

Sri Lanka’s abrupt switch to organic farming last year came under wide criticism from farmers and scientists, who have warned of a severe food shortage this year. 

Further, the two sides agreed that cooperation in development of renewable energy in Sri Lanka “should be pursued with vigour”, days after the NTPC and the Adani Group signed different agreements to set up solar and other renewable energy projects in northern and eastern Sri Lanka.

Digital identity programme

The recent proposal for bilateral cooperation in the Government of Sri Lanka’s digital identity programme, similar to Aadhaar, was also discussed. 

Mr. Modi and Mr. Rajapaksa in their discussion of the fisheries conflict, “recognised its complex and multidimensional aspects”, including the humane treatment of fishermen, livelihood, enforcement, ecology of the ocean, early release of arrested fishermen and their boats, the statement said, adding that the two sides agreed on the “urgent need to find a lasting solution to this complex issue.”

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