New Delhi: Sri Lanka is currently reeling under its worst economic crisis in the last few decades. The island nation, crippled by a severe crunch of foreign currency, has left President Gotabaya Rajapaksa’s government struggling to pay for essential imports, including fuel, with the shortage leading to prolonged power cuts lasting up to 13 hours.
The crisis led to violent clashes between protestors and the police force last week, leading to the government declaring a state of emergency across the country.
Boom To Bust: How Sri Lanka Slipped Deep Into Economic Quicksand
According to a section of critics, the current dismal scenario is a result of economic mismanagement by successive governments that have triggered and sustained a twin deficit budget shortfall alongside current account deficit.
“Sri Lanka is a classic twin deficits economy… Twin deficits signal that a country’s national expenditure exceeds its national income, and that its production of tradable goods and services is inadequate,” read a 2019 Asian Development Bank working paper.
However, the present crisis can be traced back to the promise of deep tax cuts by Rajapaksa, during a 2019 poll campaign, which were implemented months ahead of the Covid-19 pandemic, sapping parts of the country’s economy. As a result, Sri Lanka’s debt management programme derailed and the foreign exchange reserves plunged by almost 70 per cent in two years.
Also, the government’s call to ban all chemical fertilisers in 2021 took a severe toll on the agricultural sector and led to a drop in the rice crop, despite the government reversing the move later.
Another major reason behind the country’s grim picture could likely be the vicious cycle of Sri Lanka borrowing money from China for its infrastructural projects and being unable to pay it back. As a result, the island nation either had to give up control on its projects or take loans in order to repay China.
The most infamous example of this is the port of Hambantota. In early 2010s, Sri Lanka’s then President Mahinda Rajapaksa, who is now the prime minister of the country, wanted to build a port in his home region of Hambantota. However, his requests for funds were turned down by several organisations citing commercial non-viability of the port. It was China that showed interest in the project and invested over $1 billion as loans. But Rajapaksa lost in the following elections in 2015 and the new government, in a bid to avoid paying back the money, decided on a debt-for-equity swap under which the port and its surrounding 15,000 acres was leased to China for 99 years.
SRI LANKA ECONOMIC CRISIS | FULL COVERAGE
Refugees Crossing Over To India
On March 22 this year, as many as 16 Sri Lankan nationals, including women and children, from Jaffna and Mannar regions of the island, arrived in two batches in Tamil Nadu via boats.
According to reports, they paid Rs 50,000 to the fishermen for their transit. One of the groups were even stranded off the coast and was later rescued by the Indian Coast Guard.
As per Mandapam officials, if the current crisis continues, around 2,000 to 4,000 refugees are estimated to land in Tamil Nadu in the coming weeks.
“They have entered illegally due to economic misery and on a humanitarian basis we are offering them accommodation and food,” a Hindustan Times report quoted KS Masthan, Tamil Nadu Minister for Minorities and Non-Resident Tamils’ Welfare, as saying.
He added: “They are under police protection. We can take the next steps only depending upon what the Union government decides.”
Notably, all 16 of them have been kept at the Mandapam special camp in Rameshwaram.
India’s Helping Hand
Reiterating that ‘timing’ is the key factor for Sri Lanka as it tries to tackle the grave economic crisis, the Indian system has been "working overtime" to expedite its assistance to the island nation, External Affairs Minister S Jaishankar said on March 30 while wrapping up his visit to the trouble-torn country.
“In a situation like this, things cannot be done at a normal pace. Everything must be fast-tracked. Our system is working overtime. What would have taken weeks earlier is now taking days,” Jaishankar said, adding that the recently finalised Indian credit line of $1 billion for essential imports would be operationalised “very soon”.
After meeting President Rajapaksa, Jaishankar tweeted that he has assured the country of “India’s continued cooperation and understanding”.
Besides economic issues, the ongoing talks between the Tamil National Alliance (TNA) and the Sri Lankan government also figured in Jaishankar’s official discussions.
During his visit, Jaishankar also met Sri Lankan Finance Minister Basil Rajapaksa and held discussion over the current economic crisis and India’s supportive response.
Earlier, during Basil’s visit to India, Prime Minister Narendra Modi, calling Sri Lanka a ‘friendly neighbour’, had assured to stand by the country.
Later, a statement issued by the Sri Lankan High Commission in Delhi said, “Finance Minister Rajapaksa thanked Prime Minister Modi for all the assistance that India has provided to Sri Lanka at this critical time.”
How The Lankan Refugees Are Being Treated
In the wake of the exodus, surveillance has been stepped up along the coastline of Ramanathapuram, especially in Rameswaram, to check illegal influx of refugees into Tamil Nadu due to its proximity to Sri Lanka. The 16 refugees who earlier landed here have been quarantined at the Mandapam camp.
According to a report by news agency IANS, the Coast Guard and the Marine Coastal police will be beefing up their patrolling to prevent the Indian fishermen from crossing International Maritime Boundary Line (IMBL) and Sri Lankan fishermen crossing into Indian waters.
The crossing of the Indian fishermen in IMBL into their territorial waters has been a bone of contention between the two countries, with fishermen organisations staging protests against the arrest of Indian fishermen by the Sri Lankan navy. Currently, 92 Indian fishermen are in the custody of the Sri Lankan authorities.
Tamil Nadu Chief Minister MK Stalin had brought to the notice of PM Modi and External Affairs Minister S Jaishankar the arrest of Indian fishermen by the Sri Lankan authorities.
According to Ramanathapuram SP E Karthik, several enforcement agencies are part of the vigilance programme.
The Indian Coast Guard and Navy personnel would be the first ones to get information on the migration by sea and refugees would be picked up by hovercraft, Karthik said.
The Sri Lankan people are not being treated as detainees and the enforcement agency would take up antecedent verifications with those without official ‘refugee status’, he said, adding the government will decide on the future course of action soon.
Notably, Jacintha Lazarus, the commissioner for Rehabilitation and Welfare of Non-resident Tamils, in a letter dated March 23, wrote, “Sri Lankan Tamils have started entering India illegally via waterways. As many as 16 people entered India due to the economic crisis and food shortage back in their country. Reports suggest that many more people will be fleeing their country and arriving at Tamil Nadu. In such a situation, it is advised to carry out an inquiry as per the existing government norms and to accommodate them at Mandapam Camp.”
The letter further asked the local administration to take measures to ensure basic facilities at the camp and asked the authorities to submit proposals for any requirement, including housing, drinking water and electricity.
Lazarus told The Federal: “We will be temporarily accommodating all Sri Lankan Tamils reaching Tamil Nadu till the Central government takes a final decision on the issue. We have already submitted reports to the government and a decision will soon be taken.”
In a recent meeting between Tamil Nadu CM Stalin and PM Modi, the former sought the Centre's approval for the state government to provide humanitarian aid to Sri Lankan Tamils in the light of an economic crisis in that country.
During the meeting, Stalin gave a detailed memorandum to Modi on various issues, including those related to the economic crisis in the island nation.
Referring to the adversities being faced by the Lankan Tamils, Stalin said many of them embarked on a ‘perilous journey’ to Tamil Nadu due to unaffordable prices of essential commodities in the crisis-hit nation and they are lodged in a transit camp in the southern state.
The memorandum also noted that more people may be arriving in the state due to worsening economic condition in Sri Lanka.
At this juncture, the memorandum added, the Tamil Nadu government is willing to provide essential commodities and life-saving medicines to Sri Lankan Tamils, living in northern and eastern part of that country, as well as those working in plantation sector who are reeling under severe food crisis as a life saving measure, and also help them, especially vulnerable group of women and children.
"It is requested to accord necessary permission to undertake the benevolent activity," the memorandum read, as quoted by news agency PTI.
History of Lankan Influx
Influx of Sri Lankan refugees into India is not new. It happened in 19th and 20th century too. During British rule, many Sri Lankan Tamils, mostly from Jaffna, migrated to India mostly for education and employment. They also set up businesses here.
According to a report by The Indian Express, the migration of Sri Lankan refugees to India happened in four waves.
The first wave, that happened during 1983-87, witnessed the influx of around 1.34 lakh Sri Lankan Tamils to India. However, between 1987-89, around 25,600 of them returned to the island nation, the report said.
The next wave started in 1990 in which around 1,22,000 Tamils reached India.
However, on January 20, 1992, after the assassination of Rajiv Gandhi, around 54,000 people were voluntarily repatriated to Sri Lanka as they were facing pressure in the southern state post Gandhi’s death.
The third wave, that began with Eelam War III in 1995 lasted till 2002. By April 12, 2002, nearly 23,356 refugees had come to Tamil Nadu.
The fourth wave began in 2008-09 as the Sri Lankan civil war entered its final years. The Lankan exodus, by 2008-09, had turned into a flood and the refugees continued to arrive till 2013.