Embattled Sri Lanka To Get $100 Million Loan From India

By Suryamurthy Ramachandran | July 7, 2008 | 8:08 PM EDT

New Delhi (CNSNews.com) - India on Monday offered $100 million in loans to Sri Lanka that analysts said would go a long way in helping the cash-strapped island nation to resist the offensive by the Tamil Tiger rebels in the north of that country.

The Indian offer was a welcome contribution at a time when the Sri Lankan government is battling hard to raise additional revenue to spend on the war effort, said Ram Prakash, an Indian defense analyst.

As fighting escalated in April, the Sri Lankan government said the defense budget would have to be raised by at least another $175 million to $880 million this year.

The country's defense budget is expected to increase from 5.0 percent of GDP to about 6.0 percent of GDP because of the heavy fighting and the government's unexpected arms shopping spree.

Indian Foreign Minister Jaswant Singh ruled out the possibility of New Delhi's military involvement in the conflict between Sri Lankan government troops and the Liberation Tigers of Tamil Eelam, which is fighting for a separate state called Eelam in the north and east, for the last 17 years.

New Delhi was willing to extend humanitarian aid, including help in the evacuation of troops from the northern Jaffna peninsula, if requested by the island nation.

According to a joint statement issued Monday by India and Sri Lanka, the money was being offered (by India) for unspecified purchases at rates to be negotiated later.

The statement was issued after Indian Foreign Minister Jaswant Singh concluded his two-day visit to the island nation. He is the first Indian leader to visit the strife-torn country after New Delhi rejected Sri Lanka's request for military assistance to fight the Tamil Tiger rebels.

"President Kumaratunga welcomed India's offer to be of assistance in the humanitarian as well as economic sphere to ease any constraints that may be currently faced by Sri Lanka.

"Jaswant Singh added in this regard that India would be prepared to extend to Sri Lanka a credit facility, on terms to be mutually worked out between the two finance ministries, amounting to 100 million dollars."

"Does India want to help Sri Lanka at this juncture or can the Indian government help even if it so desires?" asked The island newspaper in an editorial on Monday. The paper raised questions about the meaning of India's humanitarian aid offer earlier this month.

"Sri Lanka cannot hope for much from India in its hour of need. We have to be pragmatic and look elsewhere for immediate assistance," the newspaper said.

Singh also allayed Colombo's fear that sections of the Indian coalition government could be backing the LTTE's demand for a separate state in the island's north and east.

The Chief Minister of the Southern Indian estate of Tamil Nadu, Muthuvel Karunanidhi, suggested a Czechoslovakia-type of solution, meaning a partition of Sri Lanka to end the ethnic conflict, and that suggestion created a stir in New Delhi and Colombo.

Lanka Media Minister Mangala Samaraweera warned that any such move could lead to the "Balkanization" of India itself and a hard line nationalist party, the Sinhala Urumaya (Sinhalese Heritage), decried the proposal, asking why India could not apply the solution to its own separatist conflict in Kashmir first.

Tamils make up 3.2 million of Sri Lanka's 18.6 million people. Although not all of them support the LTTE's extreme methods, many sympathize with its demand for a homeland.

Tamils accuse Sinhalese of widespread discrimination in education and jobs. The government denies the charge.

The LTTE has been blamed for the assassinations of Sri Lankan president Ranasinghe Premadasa in 1993 and Indian Prime Minister Rajiv Gandhi in 1991.