NEW DELHI: Sri Lanka has been in the news for all the wrong reasons over the past year. An unprecedented but not unexpected economic crisis and the ensuing food, fuel and power shortages sparked violent protests that forced President Gotabaya Rajapaksa to flee the country in July. His successor, interim President Ranil Wickremesinghe, declared a state of emergency, sought a bailout from the International Monetary Fund and made it clear that things were likely to get worse before they got any better.
On April 12 last year, days after Sri Lanka’s doctors warned that lack of life-saving medicines could kill more people than the Coronavirus, the government announced it had no option but to default on its foreign debt (estimated at $51 bn) since it had run out of foreign exchange required to import desperately needed goods. When a month-long grace period to come up with US $78 mn of unpaid debt interest payments also expired, the country became an official defaulter.
India stepped up to help Sri Lanka in a major way, sending food, medicines and other essentials during the crisis, as well as about $4 billion in financial relief including credit lines, a currency swap arrangement and deferred import payments.
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