SELLING THE SILVER

With the country on an acute energy crunch, including fuel that could only last for days and a sheer proliferation of the depleting dollar reserves due to mounting trade deficit and debt servicing, the country has no other option but to sell its assets now. China and India now have eyes on the country’s assets. China has been Sri Lanka’s single largest bilateral creditor; spearheading projects such as the Hambantota Port, Colombo coastal city and even an airport, the influence of the Chinese on Sri Lankan assets seems quite inevitable. On the other hand, there is India too. Although its share in the investment in Sri Lanka is comparatively lesser than China’s, it still exerts a substantial amount of influence in the region due to its political and economic power. This year, New Delhi has contributed more than $3.5 billion to aid the cost of fuel, food, and medical supplies. In Colombo, the arrival of cargoes of diesel and gasoline from India over the past four weeks has resulted in turmoil as residents went to gas stations to try and fill their cars. These developments surely show how the Indian government could move in to buy Sri Lankan assets in the future to help the failing economy of the country.

China and India now have eyes on the country’s assets. China has been Sri Lanka’s single largest bilateral creditor; spearheading projects such as the Hambantota Port, Colombo coastal city and even an airport.

With everything been said, it is important for the country to find a way forward that could help to curtail the number of assets to be sold in the future. To tackle the financial crisis, Sri Lanka requires a functioning government. The nation owes foreign creditors more than $51 billion (£39 billion), including $6.5 billion to China, which has started talking about rescheduling its loans. The G7 nations, which include Canada, France, Germany, Italy, Japan, the UK, and the US, have said they support Sri Lanka’s efforts to lower debt repayment obligations. India has contributed at least $1.9 billion, and the World Bank has agreed to give Sri Lanka $600 million. A potential loan of $3 billion (£2.5 billion) is being discussed by the International Monetary Fund (IMF). However, for this to happen, the power vacuum created by the incumbent president needs to be filled immediately. The Prime Minister needs to get a resignation from the president above everything. These ways out for Sri Lanka may be postponed until a new administration is in place since it would require a stable government that could increase interest rates and taxes to help finance the deal.

Another way forward for the island nation could be amelioration in the remittances. Rising remittances from the estimated 3 million Sri Lankans who work overseas may be a growing source of income, but both the pandemic and the currency controls put in place last year have hurt this as well. In all, expatriates send between $500 million and $600 million home each month, but when the government set the rupee’s exchange rate at an uncompetitive level, the use of the unofficial “hawala” transfer system grew while official remittances declined by as much as 52%. Therefore, there is a need for a more effective collection method that can utilize remittances to a more complete potential.

The current situation in Sri Lanka seems very bleak and has left the nation in dire straits. Therefore, it is imperative for the country to come up with a fresh administration with a strong foreign policy that could help it escape from selling its assets by utilizing effective diplomatic initiatives. However, with things as they are, the selling of Sri Lanka’s assets seems quite inevitable.