Sri Lanka, a small island nation strategically located in the Indian Ocean, has historically been at the intersection of global and regional power struggles. Over the decades, its foreign policy has been shaped by the changing geopolitical tides, balancing relations with regional giants such as India and China and engaged with global powers to secure its economic and security interests. Under the leadership of President Anura Kumara Dissanayake, Sri Lanka’s international relations have witnessed efforts to strengthen ties with India on the one hand and its complex relationship with China on the other.
One of the most important developments in Sri Lanka’s foreign policy under President Dissanayake has been the strengthening of ties with India. Visiting India on his first foreign trip after taking office, Dissanayake emphasized the historic and enduring relationship between the two neighbors. India has long been Sri Lanka’s most important regional partner, not only geographically but also politically and economically. The two countries share deep cultural, historical and religious ties and there are close interactions between the peoples.
The main focus of Dissanayake’s visit was India’s critical role in helping Sri Lanka emerge from its economic crisis. Struggling with serious economic challenges such as inflation, debt and foreign exchange shortages, Sri Lanka turned to India for economic support. New Delhi provided significant support in the form of loans and aid, and the relationship evolved beyond immediate economic assistance to long-term partnerships. During the visit, Dissanayake reiterated Sri Lanka’s commitment to furthering economic cooperation with India, particularly in areas such as trade, investment and regional security.
Sri Lanka’s cooperation with India is also framed in the context of regional stability. The Indian Ocean has become a strategic focal point for global powers and both Sri Lanka and India have a strong interest in securing the region. Discussions between the two countries have therefore spanned regional security areas where both sides seek to enhance military cooperation and maritime security.
While deepening its relations with India, Sri Lanka continues to maintain an intense and extensive relationship with China. China remains Sri Lanka’s largest economic supporter and this relationship has important geopolitical implications. President Dissanayake’s visit to China in January 2025, following the completion of Sri Lanka’s long-delayed external debt restructuring, will be a very important development for bilateral relations. During his visit, Dissanayake is expected to discuss future economic cooperation, including China’s increased investment in infrastructure projects. China’s Belt and Road Initiative is a central element of this cooperation and Sri Lanka is a key partner in this initiative. This is providing much-needed infrastructure development.[1]
Sri Lanka’s economic relations with China should be seen in the broader context of its foreign policy strategy. Sri Lanka seeks to leverage its relationship with China to attract investment, develop its infrastructure and capitalize on China’s growing economic power. The strategic balancing act between India and China is one of the most important foreign policy challenges Sri Lanka faces today.
As Sri Lanka seeks to increase foreign investment in its economy, its stock market has been one of the best performing in Asia this year, indicating the potential for economic recovery. The Government of Sri Lanka is actively seeking to encourage foreign participation in capital markets, hoping to attract investment from both India and other global players. One of the key mechanisms for expanding economic ties is the Economic and Technology Cooperation Agreement (ETCA) with India, which aims to enhance trade, technology exchange and economic cooperation between the two countries.[2]
This agreement focuses on reducing trade barriers, expanding bilateral trade and creating an environment that fosters closer economic integration between Sri Lanka and India. On the other hand, there are concerns about the potential long-term effects of this agreement. Critics argue that the ETCA, while beneficial in the short term, could undermine Sri Lanka’s economic sovereignty, particularly with respect to local industries and labor markets.
Sri Lanka is also seeking to diversify its economic relations beyond its immediate neighbors. Diplomatic efforts are directed towards strengthening relations with other global players, including the United States of America (USA) and the European Union (EU). Sri Lanka’s participation in global trade agreements and active engagement in multilateral forums have opened new routes for economic growth. For example, the country recently celebrated 75 years of diplomatic relations with Sweden, emphasizing the importance of maintaining strong global partnerships.[3]
Sri Lanka’s foreign policy is increasingly focused on developing partnerships with major global players. The country’s foreign minister has emphasized the importance of engaging with both traditional and emerging powers in a strategic manner. Sri Lanka’s diplomatic efforts focus on diversifying its relations to reduce dependence on any one country in terms of economic assistance, security partnerships or trade.
In addition to India and China, Sri Lanka has sought to develop relations with the US, Europe and Japan. Relations with the US have focused primarily on trade and investment, while Japan has been an important partner in infrastructure development. Sri Lanka’s membership in international and regional organizations such as the United Nations, the World Trade Organization (WTO) and the South Asian Association for Regional Cooperation (SAARC) provides further opportunities to engage with global actors and strengthen its international position.
Sri Lanka’s foreign policy under President Anura Kumara Dissanayake represents a dynamic effort to navigate the complex geopolitical environment of the Indian Ocean region. Strengthening ties with India while maintaining a balanced relationship with China has become the cornerstone of Sri Lanka’s international strategy. Sri Lanka is also engaging in broader diplomatic engagements with global powers and seeking to diversify its economic and trade relations. Sri Lanka’s success in balancing these competing interests will be critical to its future economic stability and geopolitical security. As Sri Lanka emerges from a period of deep economic crisis, its ability to forge strategic partnerships while maintaining its sovereignty will go a long way in determining its place in an increasingly interconnected and multipolar world.
[1] “Sri Lanka President to Visit Key Lender China”, China Global South, https://chinaglobalsouth.com/2024/12/22/sri-lanka-president-to-visit-key-lender-china/, (Accessed: 03.01.2024).
[2] “Sri Lankan President’s India Visit Energizes Relations”, The Diplomat, https://thediplomat.com/2024/12/sri-lankan-presidents-india-visit-energizes-relations/, (Accessed: 03.01.2024).
[3] “Seventy-five years of Sri Lanka–Sweden relations celebrated in Stockholm”, Daily News, https://www.dailynews.lk/2024/12/11/local/686538/seventy-five-years-of-sri-lanka-sweden-relations-celebrated-in-stockholm-2/, (Accessed: 03.01.2024).
