Strong support from India at the IMF board and the need to match China’s growing clout in the island nation have resulted in the US giving up its opposition to the international funding agency’s extending a $2.5 billion standby facility to Sri Lanka.
Sunday Island reported that IMF Executive Board would meet on July 24 to sanction the facility following the submission of a letter of intent by Sri Lanka agreeing to abide by certain conditions imposed by the funding agency.
On May 14, at the height of the war against the separatist Tamil Tigers, Secretary of State Hillary Clinton had said that it was not appropriate for the IMF to give a loan to Sri Lanka in the absence of a resolution of the conflict.
The US was leading a Western campaign to secure a ceasefire. But recently, after the war, a top US official met the Sri Lankan Foreign Secretary to say that his government had, at no stage, campaigned against the grant of the loan to Sri Lanka and that the IMF was guided by economic considerations alone.
According to Sunday Island reason for the softening of the US attitude was Sri Lanka’s apparent willingness to carry out some structural reforms in its financial system and its impeccable record in loan repayment.
However, some analysts feel that the US may be influenced by a Sino-Indian factor too. Sunday Island noted that the Indian member on the IMF board, who represents a group of countries including Sri Lanka, had been strongly advocating Sri Lanka’s case.
Then there is China’s increasing economic clout and a growing strategic interest in Sri Lanka, which has made Washington sit up. Like India, the US may be veering round to the view that the only way to prevent Sri Lanka from going wholly under Chinese influence is to meet Sri Lanka’s demands.
The paper pointed out that it was when the West was putting heavy pressure on Sri Lanka to give in to the LTTE’s demand for a ceasefire, that China signed an agreement to give Sri Lanka a $1.2 billion long term soft loan for a huge housing project. The Exim Bank of China issued a letter of interest in funding the Matara-Kataragama railway.
This railway would help build up the hinterland of the Chinese-built mega port at Humbantota in the deep south of the island.
