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India's Role in Sri Lanka's Economic Crisis and Cooperation



  Oct 21, 2023

Sri Lanka's Economic Difficulties and India's Assistance


Q1: What has been the impact of economic difficulties on Sri Lanka?

A1: Sri Lanka's economy contracted by 8% in 2022, leading to significant challenges such as unemployment, reduced incomes, inflation, and rising poverty levels.
 

Q2: How is Sri Lanka managing its economic crisis?

A2: Sri Lanka has received financial assistance from the International Monetary Fund (IMF), but the removal of subsidies as part of the IMF package has added to the hardship faced by vulnerable sections of the population.
 

Q3: What role has India played in helping Sri Lanka during its economic crisis?

A3: India has provided substantial support, including a $500 million line of credit for petroleum products, currency swap facilities, a $1 billion credit facility for essential supplies, and deferred payments totaling around $2 billion under the Asian Clearing Union.
 

Q4: How has India's assistance affected public sentiment towards India in Sri Lanka?

A4: India's timely and generous support has improved public sentiment towards India in Sri Lanka and created opportunities for expanded engagement between the two countries.
 

Q5: What are the key areas of cooperation between India and Sri Lanka?

A5: India and Sri Lanka have a bilateral trade agreement, with bilateral trade reaching $6.2 billion. They have also considered further cooperation, such as the Economic and Technology Cooperation agreement, although it has faced opposition due to concerns about Indian economic dominance.
 

Q6: How is tourism contributing to Sri Lanka's economic recovery?

A6: Tourism is a crucial component of Sri Lanka's economy, and it has been recovering steadily, with Indian tourists playing a significant role in the recovery.
 

Q7: Are there plans for further connectivity between India and Sri Lanka?

A7: Both countries have considered connectivity initiatives, including power grid connectivity and a petroleum product pipeline. A power transmission line between Mannar in Sri Lanka and Madurai in Tamil Nadu has been announced.


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