By TON Sri Lanka

Logically short of fuel and cooking gas, and nearly abandoned by China, Sri Lanka is giving up its entrenched misgivings about the United States and the Middle Eastern Islamic countries and is looking for their help to overcome the manifold predicaments Colombo is facing now.

As the Sri Lankan cabinet approved a proposal by the Prime Minister for implementing a program of the United States Agency for International Development (USAID) named. The Program for a Democratic and prosperous Sri Lanka to help endure amidst financial disasters.

This program, to be performed with a grant of $57 million, will concentrate on “fruitful democratic governance, development based on a safe market, and consolidation of the incomes vital to sustaining pressure and stress.

To move forward towards the deal, Sri Lankan PM said the cabinet there is a practice to implement. He remembered that in 2011 Sri Lanka had signed two agreements with the United States to fund two projects, namely, a “package to make durable the collaboration for egalitarian good governance and social integrity” and a “program to make a maintainable and protected economic development.” These two programs had been implemented in the past he said, and added that the suggested agreements with USAID would be on alike lines.

Excitingly, though the current deal sailed through the cabinet, a suggestion to sign the $480 million Millennium Challenge Corporation (MCC) compact by the existing Prime minister government in 2019 was opposed fiercely by Sri Lankan nationalists.

The MCC’s project was planned to ease the decrease of movement crowding in Colombo, streamline the bus service and advancement of inter-provincial roads in central Sri Lanka. It also comprised support for government enterprises to improve administration through better land registering methods.

The successor government delayed the signing of the compact in November 2021 and declared that he would never sign it. Subsequently, the United States itself canceled the MCC offer “due to absence of partner country engagement.”

Moreover, there was a factor of the pact saying that if the Sri Lankan government did not wish to carry out any part of the project for some reason, it had the option of removing these elements. However, these provisions did not appease the fears of the nationalists.

The latest agreements with USAID, by dissimilarity, are not well-defined by the public. However, there has been no adverse public reaction either. This is because the government is frantic to get the United States on board in its bid to save the gravely ill economy.

However, the U.S. has put up its conditions too. It has made aid dependent on Sri Lanka’s accepting the IMF’s bail-out conditions, which are predictable to be declared by the end of July. Conspicuously, the U.S. Senate Foreign Relations Committee has indicated that the IMF’s agreement with Sri Lanka must be depending on the independence of the Sri Lankan Central Bank to take a strong anti-corruption measures, and promotion of the rule of law.

Apparently, without these critical reforms, Sri Lanka could suffer further economic mismanagement & irrepressible debt. The IMF had said in a statement on June 30 that its 10-day talks with Sri Lanka would have to move onward on debt rearrangement to confirm a bailout.

As the public debt is assessed as unsustainable, Executive Board approval would require adequate financing assurances from Sri Lanka’s creditors that debt sustainability will be restored,” the IMF said at the end of its meetings in Sri Lanka.

Sri Lanka’s inflation grew 54.6 percent in 12 months up to June 2022. Food prices rose 80.1 percent in the past year. The country is incapable to ingress fuel because of a shortage of forex and foreign fuel vendors are asking for advance payments or for guarantees from non-Sri Lankan banks.

Desperate to get fuel, the incumbent government has sent a delegation even to Qatar to get oil on credit. Power and Energy Minister met the Qatar minister of state for energy affairs, and the president and CEO of Qatar Energy, to get petroleum products, liquid petroleum (LP) gas, and liquefied natural gas (LNG).

In the process, Sri Lanka had to retract an earlier decision to prohibit Qatar Charity, a Qatar government organization, from operational in Sri Lanka. Then-Sri Lankan National Security Minister had barred Qatar Charity in January 2021 for its unproven involvement in the serial suicide attacks connecting Islamic terrorists in April 2019 and previously alleged the organization, named “Pearl of Unity,” had been funded by Qatar Charity.

The Criminal Investigation Department (CID) then subsequently froze the accounts of Qatar Charity in Sri Lanka. These steps, along with the government’s ban on Muslims burying their COVID-19 dead on the false ground that burials would pollute groundwater, estranged the Muslim world.

However, despite the lifting of the ban on Qatar Charity, the Qatar authorities expressed to the Sri Lankan energy minister, that Qatar would help but would base its decisions on the IMF’s agreement with Sri Lanka. As the IMF’s endorsements and Sri Lanka’s readiness to implement them would be critical for aid flow.

As the IMF talks move ahead, Sri Lanka’s creditors would like debt re-structuring to cover loans from China too. But China is reluctant to agree to debt restructuring. The Western powers say that China’s loans are not transparent; some loans are hidden. Chinese loans constitute 19.9 percent of the total foreign loans taken by Sri Lanka, but the official figure is 10 percent.

At the moment India appears to be at the end of its tether with Sri Lanka. As India importing fuel from Russia despite the fact that U.S. and Western sanctioning against Russia for attacking Ukraine.