Sri Lanka was hit by the worst economic crisis since the country's independence in 1948. The reason for this was the high prices of energy and basic needs that put pressure on the community and also accumulated debt. So, will Indonesia also be affected by the crisis? From a trade perspective, the Sri Lanka crisis did not directly have a major effect on Indonesia. Because the contribution for both exports and imports does not interfere with the trade balance and the country's foreign exchange reserves. Indonesia's exports to Sri Lanka were recorded at US$ 379.9 million or Rp. 5.43 trillion (exchange rate = Rp. 14,300/US$), around 0.16% of Indonesia's total exports in 2021. Goods exported from Indonesia to Sri Lanka between such as coconut oil, rubber, iron, oil products, and others.
Meanwhile, Indonesia bought goods from Sri Lanka for US$ 53.35 million or Rp. 762 billion. This value is equal to 0.03% of Indonesia's total imports in 2021.
Goods imported from Sri Lanka by Indonesia have a lot to do with textiles. Such as embroidered or knitted materials, velvet fabrics, machines for textiles, and others.
The increase in commodity prices also still benefits Indonesia as a granary for natural products, where this can increase state income. Indonesia's mainstay of natural product exports are palm oil, coal, copper ore, and others.
Likewise with Indonesia's current foreign exchange reserves which can be said to be strong. Bank Indonesia (BI) reported that foreign exchange reserves at the end of February 2022 were recorded at US$ 141.4 billion, an increase of US$ 100 million compared to the previous month.
The position of foreign exchange reserves, continued BI, is equivalent to financing 7.5 months of imports or 7.3 months of imports and servicing government foreign debt, and is above the international adequacy standard of around 3 months of imports
Nevertheless, Indonesia should be wary when referring to the cause of Sri Lanka's fall into the crisis. It should be noted that the country's crisis is due to rising prices of all basic commodities and goods such as food, gasoline, medicines, and basic necessities.
This is the impact of high world commodity prices. This condition is now starting to infect Indonesia, where the prices of basic necessities have soared.
When compared with the increase in wages, of course, very disproportionate. So it burdens people's purchasing power.
Plus the indirect impact from India, which is Indonesia's main trading partner. India has the potential to be disrupted in terms of logistics.
Proximity to Sri Lanka has forced India to raise an alarm about the impact of the crisis. There are several things that can affect India from geopolitical, economic, to social.
With Sri Lanka's economic situation in tatters, the local government has requested US$2.5 billion in emergency aid from China. This poses a threat that China could gain more influence in the country than India.
Sri Lanka's strategic location in the distribution channel makes China look to Sri Lanka and has been trying to exert influence for a long time. But it didn't work.
From an economic point of view, there is a serious economic threat from the Indian goods distribution channel. Sri Lanka is an important shipping hub handling nearly 48% of India's International Cargo.
Due to the absence of manpower, vehicles to transport our containers between ports, and closure of port facilities a large number of Indian shipments are in Sri Lanka Ports. In addition to trade, the tourism sector and remittances can stagnate.
India is a destination for refugees from Sri Lanka whenever there is a political or social crisis. A large number of refugees came from Sinhala Land to India via Palk straits & Munnar Bay.
The first reason is the Tamil Community which has connected the two countries for centuries. Second, the civil war has lessened.
India will find it difficult to deal with such a large influx of refugees. A large number of refugees have started arriving and India needs to form a strong policy to deal with this problem.
If not handled properly, the crisis will spread to India. This is because of the piling up of refugees to Bollywood who hope to get security, medicine, and food.