Sri Lanka‘s latest stance of seeking Chinese assistance to tackle its balance of payment crisis will invariably lead the country towards losing its long standing friend, India, while drifting deeper into China’s orbit, political analysts claimed.

Sri Lanka is now embroiled in confusion regarding India and Japan’s Eastern Container Terminal (ECT) Project, suspension of the Japan-funded Light Rail Project, and the possibility of abandoning the US-backed Millennium Challenge Corporation (MCC) Compact grant of USD 480 million.

A comparison of Indian financial assistance is an important yardstick to evaluate bilateral relationships.

In the current budget, Indian finance minister Nirmala Sitharaman has planned to disburse Rs 8,415 crore amongst the neighbourhood countries – Nepal (Rs 1,050 crore), Bhutan (Rs 2,802 crore), Mauritius (Rs 1,100 crore), and the Maldives (Rs 576 crore). However, Sri Lanka has only been alloted a paltry Rs 250 crore.

When compared to their respective populations, the disparity is clear, political analysts said, adding that concentrating on budgetary support from China at this juncture will be a worrying sign for India.

The government will use the USD 500 million loan from the China Development Bank (CDB) for budgetary support, Money, Capital Markets and State Enterprise Reforms Minister Ajith Nivard Cabraal revealed.

He said this would be in addition to the USD 500 million loan obtained earlier this year and that the agreement for the fresh loan would be signed between the Finance Ministry and the CDB.

The minister said the government would reduce its dependence on international sovereign bonds as an instrument for raising financial capital.

“We should have a mix of instruments for this purpose. It is part of our debt management criteria. There is market risk involved in depending on one instrument and as such we need to have a range of instruments,” he said.

A diplomatic source said the proposed USD 500 million loan was discussed during the recent visit of the high-powered Chinese delegation to Sri Lanka, though it was not finalised.