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Milinda Moragoda, Sri Lanka’s High Commissioner to India, spoke to Indian Express’ Nirupama Subramanian about his country’s economic crisis, relations with India and big power rivalry in the Indian Ocean. Following are excerpts:
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Sri Lankan High Commissioner to India Milinda Moragoda
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Q: How bad is the economic crisis in Sri Lanka?
We have two challenges before us. One is the foreign exchange challenge, which is showing at the moment. The other is the fiscal challenge, a legacy inherited since Independence because we have lived beyond our means. The pandemic has brought it to the top. [American business magnate and investor] Warren Buffett has this famous quotation: “When the tide goes down, you see who is swimming naked.” I think the pandemic has brought the tide down. It is a real challenge, India has stepped in to stabilise the situation a little bit, but we have to deal with the root causes.
Q: How has India helped?
When Sri Lankan Finance Minister Basil Rajapaksa visited in December 2021, we agreed on “four pillars of co-operation” for the short term. The first column was to do with emergency support for food and medicine, and that is a $ 1-billion credit line announced by External Affairs Minister Dr. Jaishankar after his more recent virtual discussion with Mr Rajapaksa.
The second was to help with our petroleum supply, where the idea was, on one side, a line of credit of $ 500 million announced last Wednesday, and the other was also to collaborate with India on the Trincomalee tank farm and look at how we could work together for energy security and storage. That is the second pillar.
The third was how India could support our foreign exchange reserves and that was in two stages — the first was India supported us by giving a deferral of two months on our dues to the Asian Clearing Union, and that was $ 500 million; and the other was a $ 400-million swap. The last pillar is investment, and I would add tourism to that, as India is our largest tourism market — 20-25% of our tourists came from India before the pandemic.
Q: India-Sri Lanka relations have been up and down over the last few years. Would you say that Sri Lanka has had to rethink its relationship with India due to its economic crisis?
I wouldn’t say ‘rethinking’. From the moment President Gotabaya Rajapaksa took office, he has always been very focussed on the relationship with India. I think President Rajapaksa wants the two countries to come together, he wants the two economies to integrate more. I think the pandemic struck at a very awkward moment for him, it hit very soon after he took over. And there again, India came up with the vaccines. Until you were unable to export any more, you were the first to support us.
Some, including in Colombo, view these developments of the last four weeks as quite transactional, a quid pro quo — you finalise Trincomalee, India gives the financial assistance, now Sri Lanka has to enable Indian investments…
I think you have to see the bigger picture here.
One of the investment areas outlined is oil and gas. What we feel is that Trincomalee will be ideally positioned to be a hub for India when it comes to petroleum storage and refining. And Trincomalee can only be really used for that purpose, because it is too far away from the sea lanes to catch other options. So, it is a natural fit for us. If India is in a position to include us in the planning, then it is a win-win for us because we get investment and energy security…
Next is electricity. It is critical in this relationship. NTPC (an Indian state-owned energy company) is just about to sign an agreement with the CEB (Ceylon Electricity Board) to locate a solar facility in Sampur (in Sri Lanka’s Eastern Province). Our whole power generation capacity is under 4,300 MW. The NTPC alone generates 60,000 MW in India. The potential for wind energy is 5,000 MW in Mannar (in Sri Lanka’s Northern Province), and that is something that both sides are looking at. Then, we can look at exporting and importing electricity from India, because the cable is not a big deal to lay.
The third sector is ports. There was an issue with the East Container Terminal, now the WCT (Western Container Terminal) is going to be developed by Adani Group. If you look at the port of Colombo, 80% of the business is transshipment. Of this, 70% is to India, and of that 70%, 35% goes to Adani-held ports. With Adani coming in with 3 million teus (20-foot containers) [in the WCT], our capacity of 7.5 million teus increases significantly.
The transactional part is important, because confidence is only built through transactions. There is no other way. But very quickly, we should look at moving from the transactional to the strategic. It will be win-win, and this is the time to do it.
Q: A Sri Lankan ruling party parliamentarian recently wrote to President Xi Jinping, accusing China of having lured Sri Lanka into a debt trap, and there was also a very public and nasty spat between the two sides over contaminated organic fertiliser. Is there a lot of anti-China sentiment in Sri Lanka at the moment?
I wouldn’t look at it in that way. Chinese loans account for just 10% of our liability, so it is an important but not a critical component. Our main liabilities are coming from international bonds that we have issued. I don’t think pointing fingers in one direction or the other is useful. As I mentioned, it is a legacy since Independence. Rather than blaming one or another country, we should look at ourselves in the mirror and basically try to figure out what we did since Independence.
Q: How does Sri Lanka view the intense rivalry for influence in the Indian Ocean, with China on one side, and India on the other with the Quad?
Throughout our history, our biggest challenges and our biggest opportunities have come from the ocean. We were under the Portuguese, the Dutch and the British, all for the same reason — our strategic location. In the 1980s, when Sri Lanka was perceived to be close to the US, there were tensions with India and that had ramifications. China is a new player. We have learnt lessons from our history on how to manage this. Sometimes we make mistakes, sometimes we learn from our mistakes, and sometimes we don’t. In a way, that is our destiny and our fate. These are the realities for a small country, and we have to manage that.
Q: Where does SAARC (South Asian Association for Regional Cooperation) figure in Sri Lanka’s worldview?
Sri Lanka’s future in SAARC is as a good member, and we do what we can do to support the process. But there is a limit to what we can do there. We see the relationship with India to be the most important relationship in the region, it is our most important relationship, period. We will manage that in a way where we can hopefully work from the transactional, strategic to a special relationship and build trust.
Both countries being democracies, both countries having different voices in the system, it will be two steps forward, sometimes a step back, that is how we will have to move. On the multilateral front, our foreign ministry is trying to support not just SAARC but BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) also. But for us, the day-to-day work has to progress through the bilateral relationship.
Q: One of the traditional areas of friction between India and Sri Lanka has been the Tamil issue, and recently, Tamil parliamentarians wrote to Prime Minister Narendra Modi asking him to ensure the implementation of the 13th Amendment. Do you foresee this becoming an issue between the two countries?
President Rajapaksa on Tuesday in his presidential address to Parliament referred to a committee of experts he has set up to develop the framework of the new Constitution, which he said he will place before the Cabinet and the Parliament for discussion. I think he should be given the opportunity. As somebody who has been involved in different facets of it during my career, travelling to these areas in the north and the east, people are not interested in constitutions. They want livelihoods, they want development. All political parties should also work on that paradigm. I see this collaboration having to take place at two levels. One is on the idea of developing some kind of a new constitution that everyone can agree on, and the other is to come to some kind of understanding on how we are going to develop the north and east. Because people are not ready to wait for us to decide on a constitution when it comes to livelihoods and their future.
One of the criticisms against President Rajapaksa is that he has not met Tamil MPs even once after getting elected. There is also concern that he has appointed a Buddhist monk who has been in trouble with Sri Lanka’s law enforcement authorities for hate speeches.
We are a democracy and there are many voices. Today, right across the globe, there is polarisation, division, demonisation, nothing unique to Sri Lanka. Therefore, we need to put that in context as well. In today’s world with social media, and with people focussed on their identities, divisiveness is across the board. So, I think we should place this in that context.
As far as the effort at trying to create a consensus is concerned, the President’s focus has largely been on Parliament. There is an ongoing select committee trying to do something about the provincial council elections, so that these elections can be held. He has left a lot of this to Parliament, but now that the expert committee will come out with its proposals, at that stage, he will start engaging more.
