Indian foreign secretary to visit Sri Lanka soon ahead of President Ranil Wickremesinghe's New Delhi trip

Indian Foreign Secretary Vinay Mohan Kwatra is set to travel to Sri Lanka in the coming week to make arrangements for President Ranil Wickremesinghe's visit to New Delhi on July 20, as reported by the Daily Mirror.

This visit will mark President Wickremesinghe's first official trip to India since assuming office last year. Notable individuals accompanying the president on the visit include Fisheries Minister Douglas Devananda, Power and Energy Minister Kanchana Wijesekera, Foreign Affairs Minister Ali Sabry, and Chief of President's Staff Sagala Ratnayake.

During the visit, President Wickremesinghe is expected to engage in bilateral discussions with Indian Prime Minister Narendra Modi.

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Sri Lanka's political situation remains uncertain, as President Wickremesinghe has yet to call for a general election and honour the mandate given to Gotabaya Rajapaksa until November 2024. Meanwhile, the country's economic situation likely needs some more time for improvement, especially with the upcoming release of the second tranche of a USD 2.9 billion loan package from the IMF at the end of this year, reported the Hindustan Times.

Net debtor status and external liabilities

Sri Lanka continues to be a net debtor country with substantial external liabilities and depleted external assets.

According to an IMF report, the country's net external liabilities significantly increased from an average of 51 per cent of GDP during 2017-2018 to 74 per cent of GDP in the third quarter of 2022.

This rise was mainly due to a surge in gross external liabilities, which increased from 64 to 86 per cent of GDP, driven by high government borrowing and significant depreciation of the rupee, particularly in 2022.

Gross external assets declined from 15 per cent of GDP in 2019 to 11.7 per cent of GDP in 2022.

Foreign Direct Investment accounted for approximately 25 per cent of the external liabilities, while other investments such as debt portfolios and bank loans accounted for about 60 per cent.

The government holds the majority share of the total external debt liabilities, making up 70 per cent.

Debt owed to India, Japan, and China

During the political and economic crisis last year, India provided emergency aid to Sri Lanka, with a remaining outstanding balance of around USD 3 billion.

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Additionally, Sri Lanka owes significant amounts to Japan and China, particularly due to loans for infrastructure projects associated with the Rajapaksa administration, reported the Hindustan Times.

The terms of the agreements were changed in 2017 by Ranil Wickremesinghe, leading to the leasing of the Hambantota deep seaport to China for a duration of 99 years.

Furthermore, President Wickremesinghe is scheduled to travel to China in October to attend the Belt and Road Initiative and meet with President Xi Jinping.

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