Linking Sri Lanka's economic recovery to India's "sustained and rapid economic growth and technological advancement" will provide the country with a path to establish larger markets and move away from the debt-driven growth of the past two decades, former President Ranil Wickremesinghe has said.
What did Ranil say about economic recovery?
"The 2024 report is clear about moving Sri Lanka away from a debt-driven economic model," Wickremesinghe said at the 7th Atal Bihari Vajpayee Memorial Lecture organised by the India Foundation at the India Habitat Centre in New Delhi on Friday.
Addressing the 7th Atal Bihari Vajpayee Memorial Day event organised by the India Foundation at the India Habitat Centre in New Delhi, Ranil said, “The statement issued during Sri Lankan President Anura Kumara Dissanayake’s visit to India this month is clear on moving Sri Lanka away from a debt-based economic model.”
“For two decades, Sri Lanka’s economy has relied heavily on excessive debt, which has culminated in economic decline. Therefore, the strategy in this report is to enhance Sri Lanka’s economic growth by linking our economic recovery with India’s sustained and rapid economic growth and technological advancement,” he added.
Wickramasinghe added that India is expected to be the world’s third largest economic power by 2040.
“By then, the GDP will have crossed $1 trillion. This is the power that Sri Lanka needs to be connected as a region,” he stressed during a lecture chaired by former Union Minister Suresh Prabhu.
A six-time Sri Lankan Prime Minister, Wickramasinghe lost the presidential election in September this year to Anura Kumara Dissanayake.
He assumed the leadership at the height of Sri Lanka’s economic crisis in 2022, when the country declared itself bankrupt.
New Delhi stepped in with emergency loans worth $4 billion, which helped stabilize the economy to some extent until it negotiated a bailout package with the International Monetary Fund (IMF).
However, relations between India and Sri Lanka, especially deep economic ties, have not always been welcomed domestically.
“In 2017, the two governments signed a Memorandum of Understanding (MoU) for cooperation in economic projects in the forefront of bilateral economic cooperation. While such economic cooperation is being attempted, some labor unions and political parties in Sri Lanka are opposed to it,” Wickremesinghe said.
“On this occasion too, labor unions were involved in opposing the Trincomalee oil terminal proposal. Some political parties demanded its scrapping… But, at a crucial time, when the COVID-19 disaster and the subsequent economic crisis in Sri Lanka declared itself bankrupt… India courageously came to our aid,” he added.
This aid has changed the course of India-Sri Lanka relations, with all political parties in the Sri Lankan nation reaching a consensus to deepen economic ties with New Delhi.
Earlier this month, during Sri Lankan President Anura Kumara Dissanayake’s visit to India, the National People’s Power political party he leads, which has so far been considered the sole proponent of economic partnership, joined in announcing the India-Sri Lanka Communiqué on Developing Partnerships.
This political consensus did not exist until the beginning of the current decade.
In the previous decade, Sri Lanka had looked to China for help with its debt-fueled economic growth, particularly to finance large-scale human-made projects.
Between 2000 and 2021, China lent Sri Lanka $20.5 billion for its projects, with the bulk of the money disbursed between 2009 and 2014, according to global research firm AidData.
The projects include the Hambantota International Port, which received US$1 billion in financing from China before being leased out to a Chinese company for 99 years in 2017.
Another example of projects with debt is the Mattala Rajapaksa International Airport in Hambantota, which was built with a loan of nearly US$200 million from China.
Economic Partnership Agreement
The current economic vision for India and Sri Lanka has been in the making for at least 2 decades, with Wickremesinghe pointing to the late Atal Bihari Vajpayee as Prime Minister of India kickstarting talks towards a Comprehensive Economic Partnership Agreement in 2003.
India and Sri Lanka currently maintain a Free Trade Agreement, which was first signed in 1998. It came into force in 2000. However, a Comprehensive Economic Partnership Agreement, despite being concluded, remains elusive.
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