By Afshain Afzal

Sudden rise in prices especially fuel and key commodities has forced the nation to come to the streets. Due to tense law and order situation, Colombo has deployed military personnel at hundreds of petrol stations to help distribute fuel. Due to the shortages people are forced to stand in queue for hours, making the life of an ordinary citizen difficult. There are many city areas where people were seen fighting with each other over pity commodities.

The main reason behind the prevailing crisis is shortage of foreign exchange, which Sri Lanka use to earn mostly through tourism industry, was strong measures to control spread of pandemic COVID-19 and strict hostile anti-terrorism measures after the Easter Sunday terrorist attacks in 2019. Apperantly, the situation has been jointly created by India and United States of America in order to lead events that force the government to approach the International Monetary Fund (IMF).

It caused damage to economy as annual fiscal deficits exceeded 10 percent of GDP in 2020 and 2021, due to weak revenue performance in the wake of the pandemic, and expenditure measures to control pandemic and combat terrorism. On 25 February 2022, Executive Board of the International Monetary Fund (IMF) concluded the Article IV consultation with Sri Lanka. The Article IV entitles IMF to collect economic and financial information including central government debt, guaranteed debt, and the CBSL’s foreign liabilities, which is measured by the Colombo Consumer Price Index. Accordingly, IMF hold bilateral discussions with officials to reform country’s economic developments and policies.

Colombo financial experts recommended devaluation of currency but it further aggravated the situation. International experts opinioned that evaluation of its currency was a wise step of Sri Lanka. The IMF reforms would lead to further long term instability. In addition to worse economic situation, the security situation of Island nation is also deteriorating. Recently, after Chinese announcement of suspending its plan to build power plants on three Sri Lankan islands. The US and India are beating their chests as victory due to security concerns. India considers Sri Lanka, just across the narrow Palk Strait off India’s southeastern coast, to be within its sphere of influence. The island nation strategic location can be judged from the fact that the country is on a key sea route connecting East and West and is important to China’s ambitious “Belt and Road” global infrastructure initiative.

India also signed agreements on a Maritime Rescue Coordination Centre (MRCC) with a grant of $6 million from New Delhi. and a fisheries harbours in Sri Lanka, curriculum software in 200 schools in Galle district and between Sushma Swaraj Institute of Foreign Service and the Bandaranaike International Diplomatic Training Institute. In fact, India has shown hope to Sri Lanka for economic recovery and international coordination which paved way for forcing Colombo to agree on mutual security as well as discussions on long pending fishermen’s issues.

In another development, US Export-Import Bank’s board of directors voted to formalize the bank’s approval for financing and guarantee deals worth up to $381 million for three countries including Sri Lanka. American Citibank that backs a $500 million facility to allow 365 suppliers of aircraft maker Boeing to receive accelerated receivables payments related to export sales of Boeing aircraft. After wining of $56 million contract by Wabtec Corp, EXIM approved a $48 million loan guarantee to support the sale of 12 US made Wabtec Corp locomotives, acquired General Electric, to Sri Lanka Railways. The growing interest of US in Sri Lanka, led to Two defense cooperation agreements between the United States and Sri Lanka, the already signed Acquisition and Cross-Servicing Agreement (ACSA) and the under-negotiation Status of Forces Agreement (SOFA), Washington has also signed a Free Trade Agreement (FTA) with Sri Lanka.

In another recent development, Sri Lankan President has declared a state of emergency, giving unlimited powers to security forces, after hundreds tried to storm his house in anger over prevailing economic crisis. No doubt, the foreign aid would temporarily resolve the issue and improve security situation but it is neither the medium term nor long term solution. If we recall, Indian interference in Maldives led to country-wide protests and “Out India” campaign but Maldivian leadership seems divided over the issue. Sri Lanka is no exception as foreign interferences is likely to lead compromise of sovereignty and national integrity. It is easy to invite foreign interest groups to carryout investments but their expulsion is always a difficulty task.