Mr. Modi’s visit to Sri Lanka, the first by an Indian Prime Minister in 28 years, presents an opportunity to examine the ways and means of strengthening Indo – Lanka economic relations to boost the prosperity of this country. The path of Indo – Lankan bilateral relations will have a significant influence on Sri Lanka’s ability to realise its full economic potential. Mr. Modi’s re-setting of India’s relations with its neighbours offers an opportunity which needs to be grasped. There are a number of areas where his visit can serve to advance the agenda.

The IMF tends to be the refuge of countries that have mismanaged their economic affairs. In this context, it is important to recall that Sri Lanka has had to obtain balance of payments support from the IMF on a number of occasions. Each time, the causes have had more to do with domestic policy weakness rather than external shocks. On previous occasions, IMF support, combined with the assistance of the donor community, has enabled Sri Lanka to get over its problems without undertaking the necessary economic reforms, particularly in relation to the budget and to structural weaknesses related to low productivity and competitiveness. It is important that this should not happen yet again. It is the responsibility of both the Sri Lankan authorities and multilateral institutions to ensure that the country embarks upon a medium-term program of reforms which increases the growth potential of the economy and generates higher value employment. Some critics allege that the Fund and the Bank apply lenient conditionality when new governments of their liking are in power. Nevertheless as final outcomes of direct or indirect incentivising of the adoption of bad economic policies and neglecting fundamental economic reforms, countries have been trapped into vicious cycles of stop-go policies.

President Sirisena’s meeting with Prime Minister Modi, in Delhi, this week offers an opportunity to reset bilateral relations to achieve the declared goal of ‘irreversible excellence’. This important visit affords an opportunity to look back at the Joint Statement which was issued after Prime Minister Ranil Wickramasinghe’s discussion with the then Prime Minister of India, Atal Bihari Vajpayee, in October 2003. Many of the elements of that Joint Statement are relevant even today.