Sri Lankan President to visit India in May
Sri Lankan President Maithripala Sirisena has accepted the invitation of Prime Minister Narendra Modi to attend the International Buddhist Event at Ujjain in Madhya Pradesh. President Srisena will visit India for 2 days beginning 13th May. The meeting between the 2 leaders may see talks on the proposed Economic and Technical Cooperation Agreement (ETCA) which India is very keen to sign with Sri Lanka.
History of Indo-Sri Lankan ties
Sri Lanka, separated from India by Palk Strait, occupies a key strategic location in South-Asia and the Indian Ocean region. Indo-Sri Lanka ties date back centuries, with Buddhism as the key link between the 2 neighbours. Almost 70% Sri Lankans follow Buddhism, which originated in India. The Sri Lankan civil war and its reconciliation had strained the overall friendly relations between the close neighbours.
The China factor
In recent years, the drift of Sri Lanka towards China, especially during the reign of former President Mahinda Rajapaksa from 2005, drastically affected Indo-Sri Lankan relations. Rajapaksa accepted huge loans from China at very high interest rates, causing China to replace Japan as the largest donor to the island nation. Sri Lanka even agreed to join China's Maritime Silk Route.
The loan trap
$4.7 billion or 94% of the total Chinese loans to Sri Lanka ($5 billion) from 1971-2012 came during the reign of President Rajapaksa from 2005 onwards.
Regime change in Sri Lanka
With the ouster of the President Rajapaksa during the Presidential elections in January 2015, Maithripala Sirisena became the new President of Sri Lanka. The new President vowed to reverse the Chinese tilt of the nation. Soon after taking the oath, he visited India on his first foreign visit in Feb'15 where he signed several deals on defence, infrastructure and nuclear safety.
Review of Chinese investment in Sri Lanka
The new President Sirisena also announced the review of the major flagship Chinese projects in Sri Lanka, including the Colombo port city project which India had feared could undermine India's security.
PM Modi visits Sri Lanka
The Indian Prime Minister Narendra Modi reciprocated with a Sri Lanka visit in Mar'15. The bilateral visit by an Indian PM to Sri Lanka was the first since 1987, a gap of 28 years. Numerous agreement were signed including currency swap agreements to help stabilize the Sri Lankan rupee and extending a line of credit for the development of Sri Lankan railways.
Sri Lanka secures IMF bailout package
Meanwhile, the Lankan economy continued to falter due to mounting interest on Chinese loans and a depreciating Lankan rupee which affected the balance of payment situation. According to the present Sri Lankan government, the huge loans for funding the infrastructure projects during the Rajapaksha government had yielded no income. Sri Lanka has finally sought a $1-1.5 billion package from IMF to address the situation.
Tilting back towards China?
There are fears that short of options, Sri Lanka could embrace China back to revive its economy as Western investors are not investing in the country due to human rights issues. China remains one of the only economic giants that Sri Lanka could turn to.
ETCA to boost trade
The proposed Economic and Technical Cooperation Agreement (ETCA), which replaces the proposed Comprehensive Economic Partnership Agreement (CEPA) which had having attracted a lot of negative publicity in Sri Lanka, will boost the trade between the two countries.
