Sri Lanka: What happened and how Canada can help

Sri Lanka is in deep turmoil; understanding this crisis is crucial to Canada’s broader interests in the Indo-Pacific.

Prior to the upheaval, Sri Lanka had a thriving economy, among the best human development indices in South Asia, and extensive trade and preferential trade agreements across the region and around the world. With access to global markets, many sectors – including tea, agriculture, clothing, manufacturing, shipping and tourism – have grown. Its economy was strong, growing and supporting development and prosperity for all.

But those bright days have given way to troubling harbingers. Sri Lankan politicians were warned as early as 2015 of the risks of an evolving economic crisis.

Reckless spending and reckless tax cuts have contributed to a monstrous deficit. The 2019 Easter Sunday terrorist attacks and the pandemic have both decimated tourism, Sri Lanka’s third largest earner. The government pursued a notorious UN-led ideological ban on fertilizers and mandated organic farming, which significantly deteriorated agricultural productivity.

Sri Lanka is now facing its worst sovereign debt and economic crisis since its independence in 1948. It is experiencing major shortages of food, fuel, medicine and other essentials, with global inflation exacerbating these challenges. .

Added to this economic crisis is a geopolitical crisis led by China. In 2019, Sri Lanka was forced to lease its port of Hambantota, and therefore part of its sovereignty, to China for 99 years under Beijing’s predatory Belt and Road Initiative debt schemes. Unsurprisingly, this « commercial » Chinese port received a military surveillance vessel from the PRC, which has the ability to monitor the activities of submarines and QUAD satellites despite Indian protests.

Thus, rebuilding Sri Lanka and countering China go hand in hand. Sri Lanka is a strategic maritime theater, with Beijing seeking to use the country as part of a larger strategy to secure its interests. And as home to the largest Sri Lankan diaspora in the world, including many Tamils ​​who came as refugees, Canada also bears a moral responsibility for the well-being of Sri Lanka.

So what does it take to help restore Sri Lanka?

India is an essential partner for Canada in this endeavour. While Beijing’s aid has remained mostly insignificant, India has stepped up its $4.5 billion emergency economic aid to Sri Lanka, about two-thirds of what Sri Lanka needs to stabilize its crisis.

However, for a resilient and stable Sri Lanka, a greater international effort is needed.

Canada could host Western and Asian nations, assembling an IMF Economic Debt Restructuring Plan for Sri Lanka with strong partnerships for Sri Lankans. With our closest partners, namely the United States, the United Kingdom, the European Union, India, Japan and Australia, Canada could help Sri Lanka implement economic reforms and long-discussed policies.

This would include support for justice for Sri Lankans, the release of all political prisoners, the demilitarization of peaceful areas populated by Tamils, the implementation of a widely supported constitutional amendment delegating land and police powers to the states and the unleashing of corporate and investment policies in an economic pact to rebuild and develop Sri Lanka. .

Together, Canada and its partners are Sri Lanka’s largest trading partners, providing a natural window into Sri Lanka’s indispensable role in the Indo-Pacific. It is timely that Canada is pursuing an ambitious trade agreement with India, which coincides well with the lengthy economic negotiations between India and Sri Lanka.

For major Pacific democracies determined to establish a rules-based order, this is an opportunity to counter Beijing’s hegemonic ambitions and demonstrate how collaborative interventions can help Sri Lanka weather the crisis. Part of a clear agenda for Canadian interests, this would allow Sri Lanka to become a resilient and strong democracy, and give Canada the opportunity to earn the respect it needs in a region from which it has been absent for too long time.

Shuvaloy Majumdar is a Munk Senior Fellow and directs the Foreign Policy and National Security Program at the Macdonald Laurier Institute. Vijay Sappani is of Indian-Sri Lankan descent and a member of MLI’s Canada-India Strategic Dialogue.

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