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Friday June 2nd, 2023

India, China use own geopolitical strategy to keep crisis-hit Sri Lanka in check

  • India sends RAW chief after lending $500 mln loan
  • RAW chief met President Wickremesinghe, former finmin Basil Rajapaksa
  • China sends fuel, rice after sending its research ship in August amid Indian protest
  • Analysts say Sri Lanka’s bargain power to deal with India, China down after crisis

ECONOMYNEXT – Sri Lanka President Ranil Wickremesinghe was asked by the chief of Indian intelligence agency, Research and Analysis Wing (RAW) to fulfil all the commitments the island nation has promised since 1987 including a Federal solution for the ethnic minority Tamils, sources close to the president said.

The RAW chief Samant Kumar Goel also has discussed possible threats by the expansion projects of China which now has a strong foothold in Sri Lanka mainly on commercial aspects. But India and the West suspects China has a military agenda which Beijing has vehemently rejected.

Sri Lanka is in the middle of an unfolding geopolitical cold war between China and Indian-led ally which also includes the other QUAD nations – The United States, Japan, and Australia.

The visit of Goel comes amid indirect efforts by Wickremesinghe to meet Indian Prime Minister Narendra Modi since the last month, sources said.

“He (Goel) discussed on the pending issues including some commercial transactions. He also raised concerns over increased activities by China and Pakistan in Sri Lanka’s North and East,” a source close to president told EconomyNext referring to Sri Lankan provinces which are closest to South India and dominated  by ethnic minority Tamils.

Another government source said: “Well, he has raised all the commitments Sri Lanka has undertaken including the implementation of 13th amendment.”

President Wickremesinghe last week expressed his willingness to negotiate a solution for the long lasting issues faced by Tamils.

President’s Media Division did not respond to the queries by EconomyNext on the meeting between Wickremesinghe and the RAW chief.

Cabinet Spokesman denies 

Officials at Sri Lanka’s Foreign Ministry said they did not facilitate RAW chief’s visit to Sri Lanka, while the cabinet spokesman said he was not aware of any such visit.

“I swear that I don’t know such an intelligence chief met the president or any other government official,”Cabinet Spokesman Bandula Gunawardena told weekly cabinet press briefing on Tuesday.

“If there was such a meeting, the president will inform that to the parliament. We believe that he reveal all the information to the nation without hiding anything,”

Political sources said the RAW chief also met finance minister and strategist of the Sri Lanka Podujana Peramuna (SLPP) Basil Rajapaksa.

“I think the message is related to the upcoming election,” a source close to Rajapaksa told EconomyNext.

Officials from Indian High Commission were not immediately available for comment on the RAW chief’s visit.

The Indian intelligence chief’s visit also comes ahead of intensifying demands for local government and parliament polls by both organized political parties and people those who participated the April-July protests which ousted former president Gotabaya Rajapaksa.

Government sources said the reason for the RAW chief’s visit was part of India’s efforts  to see a stable long term government to assist Sri Lanka to overcome the current economic crisis.

Sri Lanka’s unique and strategic location in the Indian Ocean has attracted major World powers. However, Sri Lanka has so far not succeeded fully in managing the world powers in a none-aligned manner according to some analysts.

There was a strategy under former president Gotabaya Rajapaksa, but it failed eventually, they say.

Indian role, concerns over China  

Some political analysts are wary of India’s agenda on Sri Lanka.

“It is in the public domain how India worked against Ranil Wickremesinghe in the July 19 election among the MPs to select the president,” a political analyst who is critical of Rajapaksa told EconomyNext.

“Former president Mahinda Rajapaksa himself in 2015 said it was India and RAW who defeated him. So the RAW chief’s visit could be something more than what we hear. How can India order a sovereign nation on how and whom to deal with?”

Despite Indian’s offering over two billion dollars to Sri Lanka at a crucial juncture as well as other kinds of support many Sri Lankans still do not have confidence in the Asia’s fastest growing nation due to its backing for Liberation Tigers of Tamil Eelam (LTTE) at the beginning of 26-year civil conflict in Sri Lanka in 1983.

According to other analysts Indian concerns can be partially justified because of how China is expanding in Sri Lanka.

Since the end of the war in 2009, China has invested billions of US dollars mainly in Sri Lanka’s long-neglected infrastructure.

Sri Lanka owes nearly 20 percent of its total $35 billion of external debts to China.

The criticism from India and the West is that the Chinese investments have failed to give significant return on investment to repay the island nation’s loan and thus Sri Lanka is caught in a “debt trap” by China.

China has rejected this.

Foreign Minister Ali Sabry in an interview with Indian media rejected allegations about a debt trap and said “we don’t agree with that phrase.”

Bad to worse in economic crisis

China has been expanding its assistance to Sri Lanka in the form of fuel and rice specially targeting fishermen and the poor.

China has also started funding underprivileged universality students in Jaffna and Eastern Universities. This has also drawn Indian concerns, university sources have told EconomyNext.

Jaffna University Students’ Union last week said they are opposed to a move by the government to sign a memorandum of understanding with a Chinese agricultural university.

Sri Lanka has lost its bargaining power to negotiate with both India and China in the current economic crisis and the Asian giants are major external creditors and the island nation’s recovery from the economic crisis depends on the debt restructuring agreement by the both nations, according to analysts.

“Sending a ship that is alleged to be a spying ship showed that China wants to prove its influence in Sri Lanka. And now India has responded it with sending its RAW chief to directly discuss with Sri Lanka’s president,” a pro Wickremesinghe political analyst told EconomyNext asking not to be named.

“But we have no options because we are in a crisis where we need the help of both these nations.” (Colombo/Nov30/2022)

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  1. Kumar Soysa says:

    Many of us knew in the mid-1990s that China wants landing stages in Sri Lanka!!! Any idiot could not have missed this!

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  1. Kumar Soysa says:

    Many of us knew in the mid-1990s that China wants landing stages in Sri Lanka!!! Any idiot could not have missed this!

Sri Lanka to ramp up weekend fuel deliveries after petrol price cut

More deaths reported at Sri Lanka fuel queues

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Petroleum Corporation will be operating on the weekend to complete all fuel deliveries to end vehicle queues forming outside fuel stations after the price revision earlier in the week, Energy Minister Kanchana Wijesekera said.

“Instructions have been given to CPC and Ceylon Petroleum Storage Terminals to continue fuel deliveries on Saturday and Sunday this week to supply sufficient stocks to all fuel stations,” Minister Wijesekera said in a TWITTER.COM MESSAGE

“To reduce expenses on overtime, CPC and CPSTL have not been operating on Sundays and public holidays in the last 4 months,” Wijesekera said.

“Non-placement of orders by fuel stations from last Saturday, anticipating a price reduction, not maintaining minimum stocks, immediate increase in demand by consumers after the price revision, and quota increase have created shortages in the fuel stations.”

The Minister in April 2023 said all fuel stations would be required to maintain a minimum of 50 percent of stock tank capacity.

“I have asked CPC to review and suspend the license of fuel stations that had not maintained minimum stocks.” (Colombo/ June 02/ 2023)

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Sri Lanka bonds yield up at close, rupee at 291.75/292.50 against the US dollar

ECONOMYNEXT – Sri Lanka’s bonds closed steady on Friday, dealers said, following the central bank’s decision to cut its main policy rate by 250 basis points.

The Spot US dollar closed at 291.75/292.50 rupees, dealers said.

The rupee opened at 290.25/75 to the US dollar Thursday and closed at 292.50/295.50 to the US dollar.

A bond maturing on 15.09.2027 closed at 24.70/90 percent up from 24.50/90 percent a day earlier, dealers said.

A bond maturing on 15.05.2026 closed at 25.75/26.25 percent up from 25.00/26.00 percent a day earlier.

A bond maturing on 01.05.2025 closed at 27.00/30 percent, up from 26.30/27.00 per cent at last close.

A bond maturing on 01.07.2032 closed at 20.25/21.00 percent, up from 20.00/40 per cent at last close.
(Colombo/ June 02/2023)

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Sri Lanka’s shares edge up on positive macroeconomic sentiments

ECONOMYNEXT – Sri Lanka’s shares closed higher in trade on Friday, over positive macro-sentiments encouraging investors to redeem their interest towards buying, an analyst said.

The main All Share Price Index was up 0.72 percent or 62.19 points to 8,753.80,  while the most liquid index S&P SL20 was up 0.68 percent or 16.87 points to 2,487.29.

Sri Lanka’s inflation in the 12-months to May 2023 has eased to 25.2 percent from 35.3 percent a month earlier according to a revised Colombo Consumer Price Index calculated by the state statistics office.

Prior to the Monetary Policy investors were quite optimistic that inflation is to lower and interest rates will decrease and since exp, an analyst said.

Sri Lanka Central Bank is waiting for the government proposal on the domestic debt restructuring (DDR), the central bank governor Nandalal Weerasinghe said amid uncertainty over DDR and speculations over instability in the banking sector.

“On debt restructuring, the borrower is the ministry of finance’s treasury. Certainly we will announce what the strategy will be. We are waiting for a government proposal,” Weerasinghe said.

Sri Lanka’s investors are waiting on assurances to be made on debt restructuring and optimization, Central Bank Governor Nandalal Weerasinghe said, “It is up to the government to clear the uncertainty, because from our side we have done that part.”

The central bank cut the key policy rates by 250 basis points to spur a faltering economic growth as inflation was decelerating faster than it projected.

The speculation of DDR has hit the market and the risk premium has kept the market lending rates well above the central bank’s policy rates. The government has yet to present its plans on DDR.

Weerasinghe said the central bank has done its best to reduce the risk premium through bringing down the market lending rates while keeping the policy rates unchanged.

Sri Lanka’s President Ranil Wickremesinghe has discussed progress of International Monetary Fund program and debt restructuring during a visit of Deputy Managing Director Kenji Okamura, statement said.

“The discussion primarily focused on the progress of the IMF program between Sri Lanka and the IMF,” a statement from President’s office said.

“Attention was also paid to the on-going debt restructuring negotiations.”

However Officials from IMF have said Sri Lanka has to focus on expanding taxes.

“We discussed the importance of fiscal measures, in particular revenue measures, for a return to macroeconomic stability,” Deputy Managing Director Kenji Okamura said in a statement.

The finance ministry this week issued rules requiring everyone above 18 year of age to register to pay income tax.

“I was encouraged by the authorities’ commitment to negotiate a debt strategy in a timely and transparent manner.

The market generated a revenue of 738 million rupees, while the daily average was 1 billion rupees.

Top gainers in trade were Vallibel One, LOLC Finance and Browns Investment. (Colombo/June02/2023)

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