By Abdullah Arshad

It is impossible to fully explain the foreign policy of Sri Lanka in 2022 without taking into account the fact that all significant economies collapse radically and present certain restrictions. The nation had experienced an acute balance gotten crisis characterised by empty foreign-exchange, sovereign default, and fuel, food and medicine shortages. The conditions essentially transformed the outside environment where diplomatic decisions arrived at. Sri Lankan diplomacy was shifted towards the short-term economic survival instead of adjusting to long-term strategic inclinations. The foreign policy thus changed to be based on autonomy-based interaction, instead of a trend of economic reliance and non-level economic partnership with foreign agents.

These changes are rooted in the fact that until 2022, the exposure to external borrowing and insufficient diversifi cation of exports in Sri Lanka became the antecedents of change. Extraneous use of foreign debt and the absence of fi scal discipline and the impact of the economic shock of the COVID 19 pandemic placed the involvement with the debt and fi nancial institutions as need and not an option to stabilise the economy.

Within this, economic vulnerability had been converted directly into constraint of foreign-policy. International monetary fund involvement has turned out to be the corner stone in the external policy of Sri Lanka since the IMF support cannot be done without in terms of rebuilding trust and opening the door to the additional financial aid.

But to access IMF programmes, major creditors had to offer debt-restructuring guarantees and domestic reforms needed to be implemented. This created an atmosphere of asymmetric interdependence whereby Sri Lanka relied a lot on outside forces as opposed to them depending on Sri Lanka. As a result, the foreign-policy behaviour became reserved, obedient, and oriented at preservation of credibility with the economic leverage-holders. The connections with China can be used as an illustration of the way in which geo-economic

factors transformed the diplomatic behaviour. The Belt and Road Initiative saw China become a large bilateral creditor with the help of infrastructure fi nancing. In its process of restructuring the debt, Sri Lanka was also forced to handle its relationship with Beijing with care because the IMF talks could be damaged in case it takes long before negotiations ensue or in case of opposition. Diplomatic signalling to China was thus less about strategic diversification and more about the assurances and continuity, which was on a larger scale with financial exposure limiting the scope of acceptable foreign-policy decisions.

Meanwhile, Sri Lanka became even more involved in interaction with India as a source of immediate liquidity and necessary import. The currency swaps, credit lines and emergency assistance in India were stabilising, through this crisis. This was a form of ideologically uninfluenced engagement but based on the immediate necessity. A more cooperative, pragmatic foreign-policy towards India occurred, which represented a geo-economic child-let go-calculation of dependence plus decreasing vulnerability. This conduct indicated the way in which the economic tools instead of security alliances organised regional diplomacy during the post-crisis era.

The foreign policy of Sri Lanka was also getting more influence through restructuring debts and management by the western states and multilateral institutions. The promises of transparency, fi scal reform and institutional restructuring became the primary diplomatic priorities. Such interactions also limited the policy discretion since going against accepted models would lead to stalling in terms of funding. The aggregate impact of these relationships created a foreign-policy atmosphere of negotiating, reassuring and economic signalling as opposed to a sense of strategic aggression.

As the Sri Lankan case demonstrates, a situation of asymmetric interdependence redefines foreign policy in such circumstances of economic distress. Although the state did not lose formal sovereignty, it could not take independent external policies based on non-egalitarian economic relations. It was also geo- economics that caused the traditional security issues to be seen as a secondary focus of the diplomatic behaviour as any access to fi nance, trade stability and creditor confidence determined the external involvement. The foreign policy then turned into an appendix of the economic administration instead of being an instrument of power projection.

The new position also obtained domestic consequences, because the decisions in foreign-policy were rather closely connected with the internal political legitimacy and the expectations of people. The fact that the government could prove that it was making

advances in its dealings with foreigners became one of the major indicators of credence with the homeland. Accordingly, the messaging of foreign-policy focused on stability, responsibility and cooperation, which constituted a strengthening of the external image needed to recover the economy. This also shows the interaction between internal vulnerability and external dependence to create the post-crisis diplomatic posture in Sri Lanka.

To sum up, the post-2022 foreign policy of Sri Lanka shows the increasing relevance given by the state to the issues of economic vulnerability becoming determinant in state behaviour. The crisis changed diplomacy into a way to achieve financial survival in an international system that is characterised by an unequal interdependence. This experience shows that foreign policy in the economically stricken states is slowly becoming obedient to the geo-economic restrictions, in which preserving access to external resources takes precedence over strategic autonomy. This case of Sri Lanka thus clearly exemplifi es the idea of how the terms of the economy may reshape the scope and course of the foreign policy in the modern international system.