Sri Lankan Refugees Fleeing To India’s Tamil Nadu

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Economic Crisis As Political Impasse Prevents Creditors Reach Debt Refinancing Agreements  

Sri Lanka’s on-going political and financial crisis appears to have no improvement as refugees from the island state have been crossing the Adam’s Bridge causeway to neighbouring India. A financial crisis has prevented the nation, which is in debt to the tune of about US$56 billion, from importing essential supplies, including gas, while shops are now running on empty. Crops are failing this year due to an earlier, inconceivable Government ban on imported fertilizers.

Some 150 Sri Lankans have apparently arrived in Tamil Nadu after crossing all or part of the Adam’s Bridge causeway, a series of small sand bars and islands that cross between Sri Lanka and India across the Palk Strait. The water is relatively shallow, yet dangerous with a rapid ocean current and sharks. Crossing is prohibited, although is sometimes attempted. Doing so is a 10-15 hour journey.

The most recent batch of refugees were picked up on the Indian side of the Adam’s Bridge islands, on a small islet and were taken to a military camp facility at Mandepam near Rameswaram.

The Sri Lankan political crisis has not eased, despite the previous President Gota Rajapaksa being ousted in May and many of his family members – some 20 plus who had held Ministerial positions – also forced to resign, although many where subsequently reelected to a unity Government presided over by new President Wickramasinghe, who has imposed strict military laws and curfews to quell unrest. However, Wickramasinghe is viewed as a stooge for the Rajapaksa’s – whose elder statesman, previous President Gota Rajapaksa fled to Singapore and is now in Thailand. Few in Sri Lanka believe he is not effectively running the country in exile, while there are also signs he wishes to return to Sri Lanka.

The situation is making life extremely difficult for the Sri Lankan people, the political impasse means that debt restructuring and refinancing isn’t taking place as no-one will lend to the country with the existing leadership in place. The IMF have been called in to deal with the situation, however the Rajapaksa’s influence have meant they are unable to proceed with any attempts to bail the country out. New Presidential elections are not due to be held until 2024.

The situation is exasperating for China, which is owed about 30% of Sri Lankan debt, mainly for a number of Belt and Road Initiative projects that have stalled due to local corruption. Revenue-generating infrastructure such has ports, railway, highways, and commercial buildings are behind schedule and are sitting uncompleted and idle. The other main creditors are India and Japan, while a variety of private investment funds have also been burned and are now being represented by Lazards, who are suing for their return.

Not surprisingly, China, India and Japan are loath to lend more until a better political solution to the current impasse can be found. Until that occurs, Sri Lankan refugees are going to continue to make the journey across the Adams Bridge Causeway.

Meanwhile, Sri Lanka has been pinning its hopes of generating some form of income through the winter tourist season, which begins from November and runs through to about March. Their sales pitch has been built on the provision of a new 6-month tourist visa and suggestions that it would cost 4 times less to live in Sri Lanka than Europe, and there would be savings on heating bills. That 4 times less living expenses than Europe would be valid – if there was anything to buy. With the country starting to see some desperation among its own population in terms of finding food to eat, the WinterSun 2022/23 tourist season in Sri Lanka may be rather less appealing than neighboring Thailand, or Bali.

As for China, in terms of its total BRI lending, that recently surpassed US$1 trillion. Beijing will have factored in debt burdens with the BRI – it remains to be seen how the Sri Lankan debt can be dealt with – one of the options to at least write off part of the capital could be a Free Trade Agreement but the Rajapaksa’s disagree – it would break their stranglehold on the Sri Lanka domestic economy and break up the cartel of excessive import duties – including under the counter payments of 20% – being levied on imported items.

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