New Delhi and Colombo have framed a four-point package, including a line of credit to cover the import of food and medicines and a currency swap arrangement, to deepen economic ties
India and Sri Lanka have framed a four-point package, including a line of credit to cover the import of food and medicines and a currency swap arrangement, to deepen economic cooperation and to help the island nation cope with economic problems.
The package was finalised during two meetings that visiting Sri Lankan finance minister Basil Rajapaksa had with his Indian counterpart Nirmala Sitharaman and external affairs minister S Jaishankar on Wednesday and Thursday.
This was Rajapaksa’s first overseas visit since he assumed office in July.
The two sides discussed four pillars for short and medium-term cooperation, according to a statement issued by the Sri Lankan high commission at the conclusion of Rajapaksa’s visit on Thursday.
They include a food and health security package on an urgent basis that envisages the extension of a line of credit by India to cover the import of food, medicines and other essential items by Sri Lanka, an energy security package that will include a line of credit to cover the import of fuel from India, and the early modernisation of Trincomalee Tank Farm.
The package also includes an offer of a currency swap to help Sri Lanka address the current balance of payment issues, and facilitating Indian investments in different sectors in Sri Lanka to contribute to growth and expand employment, the statement said.
The two sides further agreed that modalities to realise this package would be “finalised early, within a mutually agreed timeline”, the statement said.
Rajapaksa and Sitharaman and Jaishankar “agreed to open direct lines of communication” and to be in direct and regular contact with each other to coordinate on this initiative.
People familiar with developments said on condition of anonymity that it was significant that both Sitharaman and Jaishankar participated in the two rounds of discussions with Rajapaksa. They said this reflected the importance India attaches to the relationship with Sri Lanka.
The people said Sri Lanka’s request for a $1 billion bilateral currency swap, first made in 2020, did not figure in the latest discussions. The currency swap offered to Sri Lanka is expected to be made under the South Asian Association for Regional Cooperation (Saarc) facility and would be worth $400 million.
Ties between New Delhi and Colombo were hit earlier this year when Sri Lanka scrapped a 2019 deal with India and Japan to operate the East Container Terminal at the Colombo port, angering both countries.
In October, state-owned Sri Lanka Ports Authority (SLPA) inked a deal with India’s Adani Group to develop and run the Colombo port’s West Container Terminal.
Adani Group and its local partner John Keells Holdings will jointly have an 85% stake in the West Container Terminal, giving India a much-needed strategic presence at the Colombo port, where almost 70% of operations involve shipments bound for India.
Rajapaksa, who visited India at the invitation of Sitharaman, also had bilateral discussions with Jaishankar. These discussions focused on a range of issues of mutual importance, with particular attention on economic cooperation. Rajapaksa also met petroleum minister Hardeep Singh Puri and National Security Adviser Ajit Doval.
In these meetings, Rajapaksa thanked India for the support it has extended Sri Lanka over the years in many spheres, the statement said. Rajapaksa briefed the Indian side on the economic situation in Sri Lanka and his government’s approach to addressing post-Covid challenges.
The Indian ministers expressed New Delhi’s solidarity with Colombo and reiterated that India has always stood by Sri Lanka and, in the current situation, would be guided by its “Neighbourhood First” policy, according to the statement.