In a display of its 'Neighbourhood First' policy, India once again extended a helping hand to debt-ridden Sri Lanka. The latest instance of support came as the Indian High Commission handed over a cheque amounting to 450 million for the Sri Lanka Unique Digital Identity (SL-UDI) Project.

Taking to Twitter, High Commission of India in Colombo, Sri Lanka said, "High Commissioner handed over a cheque of INR 450 million to State Minister Hon. @kanakadh, in the gracious presence of Hon. @SagalaRatnayaka today for SLUDI project, which is being implemented through grant assistance by Govt of #India.”

According to the President's Media Division of Sri Lanka, the SL-UDI project is expected to significantly strengthen the country's digital infrastructure and drive growth across multiple sectors. This notable advancement brings Sri Lanka closer to a more technologically advanced future, paving the way for improved economic development and prosperity.

The island nation faced a severe financial crisis triggered by the impact of the Covid-19 pandemic on its crucial tourism sector, along with a decline in remittances from overseas citizens. The situation worsened with the escalation of the Ukraine war, leading to soaring inflation and steep price hikes for imports, notably fuel. In response to this challenging economic situation, India extended its assistance to the debt-ridden country.

India's sincere assistance to Sri Lanka has proven invaluable in navigating the challenging path of seeking assistance from the International Monetary Fund (IMF). Sri Lankan Minister JeevanThondaman recently emphasized the strength and closeness of the India-Sri Lanka relationship. He further highlighted that the economic crisis served as a revealing moment, identifying true friends of Sri Lanka.

Emphasizing the significance of India-Sri Lanka's cultural and economic ties, he emphasized the need for a "permanent solution" to the long-standing fishermen issue.

Sri Lanka is currently grappling with its most severe economic crisis since gaining independence in 1948. The country's Central Bank has been facing inadequate foreign reserves, and the loss of access to international capital markets resulted in Sri Lanka defaulting on its debt obligations for the first time in its history.

Furthermore, the economy's collapse can be attributed to a combination of factors, including uncontrolled external borrowings, tax cuts that widened the budget deficit, restrictions on the import of chemical fertilizer, and the sudden floating of the Sri Lankan rupee. These elements collectively contributed to the current crisis Sri Lanka is facing.

Adding to their woes, the COVID-19 pandemic exacerbated the situation as the island nation heavily relies on its tourism sector as a crucial pillar of its economy.

Notably, the economic crisis in Sri Lanka led to mass protests last year, forcing then-President Gotabaya Rajapaksa to flee the country. Demonstrators stormed his official residence amid acute shortages of food, fuel, and essentials.

Amid an acute foreign currency crisis leading to a foreign debt default, the country declared in April that it would suspend almost USD 7 billion in foreign debt repayment scheduled for this year out of the total USD 25 billion due until 2026. According to the Daily Mirror, Sri Lanka's overall foreign debt currently amounts to USD 51 billion.

In March 2023, the country, facing economic challenges, secured approval from the IMF for a 48-month arrangement under the Extended Fund Facility, amounting to approximately USD 3 billion. This financial support aims to bolster Sri Lanka's economic policies and facilitate necessary reforms.

Out of the entire USD 3 billion funds, the country received an immediate commitment of approximately USD 330 million as an initial disbursement.

Image source: ANI