Sri Lanka and India will sign a pact to link their power grids and start negotiations on an improved trade deal within two months, a Sri Lankan diplomat said Wednesday, as the island nation seeks a way out of its worst economic crisis in decades. India has provided some $4 billion in aid to the southern neighbor since the crisis erupted early last year, but Sri Lanka is seeking now to boost trade and investment as it prepares to close a $2.9 billion loan from the International Monetary Fund, the country’s envoy to New Delhi. “We have to have growth or the economy will basically contract,” said Milinda Moragoda.
The ambitions of the parties
Moragoda emphasized that Sri Lanka is moving “to the next level,” seeking deeper integration with India through increased Indian tourism and investment. It is crucial for the country to have significant growth to counter the impending slowdown.
In this sense, diplomatic efforts are focused on a project to connect the electricity grids between the two countries via a cross-border cable that will mainly power the North of Sri Lanka through its renewable energy potential. In the coming weeks, negotiations will be conducted to expand the opportunities offered by the existing trade agreement between the parties, which focuses mainly on sectors such as textiles and clothing – a major source of Sri Lankan foreign exchange.
Positive outlook and shared hopes
India will remain Sri Lanka’s largest trading partner, accounting for USD 5 billion annually. In addition, this increased cooperation should allow local populations to have better access to energy resources through a sustainable and reliable infrastructure while generating directly or indirectly several additional jobs in good numbers.
