COLOMBO, Sri Lanka (AP) — Indian Prime Minister Narendra Modi on Friday began a two-day state visit to neighboring Sri Lanka, where he was expected to sign several power and defense agreements as concerns grow over the influence of regional rival China in the debt-stricken island nation.
Modi is the first foreign leader to visit Sri Lanka since its President Anura Kumara Dissanayake assumed office in September and is a follow-up to the latter’s visit to New Delhi in December.
Modi was slated to virtually kick off construction work on a new solar power plant in Sri Lanka’s east.
India has been highly concerned about China’s increasing presence in Sri Lanka, which is located on one of the world’s busiest shipping routes in what India considers part of its strategic backyard.
China has exerted influence in the country in recent years by including it in its Belt and Road global development program.
Modi is expected to hold bilateral talks with the Sri Lankan leader and officials on Saturday and sign several bilateral agreements. He will virtually inaugurate the construction work of a 120 megawatt solar power plant in the island’s eastern region.
The power project is crucial for Sri Lanka, which is struggling to reduce its dependence on fossil fuel for power generation.
Sri Lanka faced a severe power crisis in 2022 when it was having difficulty importing sufficient stocks of oil and coal after the country’s foreign reserves were depleted during an unprecedented economic crisis.
The support of the two regional rivals is crucial for Sri Lanka to emerge from its worst economic crisis in decades, which ultimately paved the way for Dissanayake’s party to come to power.
Beijing was once widely seen as having an upper hand with its free-flowing loans and infrastructure investments. But Sri Lanka’s economic collapse in 2022 provided an opportunity for India, as New Delhi stepped in with massive financial and material assistance, including food, fuel and medicine.
At the same time, China’s support for restructuring its infrastructure loans is vital for Sri Lanka. Under Dissanayake’s leadership, Sri Lanka has been trying to emerge from bankruptcy by restructuring its staggering debt.
Sri Lanka declared bankruptcy in April 2022 with more than $83 billion in debt, more than half it to foreign creditors. It sought the help of the International Monetary Fund, which approved a $2.9 billion four-year bailout package in 2023, under which Sri Lanka was required to restructure its debt.
In September last year, Sri Lanka said it had concluded the debt restructuring process after reaching agreements with bilateral and multilateral creditors and private bondholders. Sri Lanka is seeking to obtain $17 billion in debt service relief.
Sri Lanka’s crisis was largely the result of economic mismanagement combined with fallout from the COVID-19 pandemic, along with 2019 terrorism attacks that devastated its important tourism industry. The pandemic also disrupted the flow of remittances from Sri Lankans working abroad.
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