Home / India / Crisis-hit Sri Lanka may allow Indian rupee to be used in local transactions

Crisis-hit Sri Lanka may allow Indian rupee to be used in local transactions

COLOMBO, Sri Lanka (AP) — Sri Lanka is considering the possibility of allowing the use of the Indian rupee for local transactions, as the island nation struggles to build its depleted foreign reserves and to emerge from last year’s unprecedented economic crisis.

Sri Lankan Foreign Minister Ali Sabry said Saturday the move to allow the use of its giant neighbor’s currency would enable “tourists and other people from India to directly use Indian rupees here” without going through the hassle of multiple currency conversions.

Sri Lanka imports plenty of items from India — its largest trading partner — including food, pharmaceuticals, construction materials, automobiles, fertilizers and chemicals. Trade between the two nations stood at $5.45 billion in 2021, according to official figures.

Kuki tribal protesters shout slogans during a demonstration against deadly ethnic clashes in the country's northeastern state of Manipur, in New Delhi, India, Saturday, July, 22, 2023. Protests are being held across the country after a video showed a mob assaulting two women who were paraded naked.  Thousands of people, mostly women, held a massive sit-in protest in India's violence-wracked northeastern state of Manipur state demanding immediate arrest of those involved in the harrowing assault.  (AP Photo/Altaf Qadri)

Thousands of people including mostly women have held a massive sit-in in India’s violence-wracked northeastern state of Manipur demanding the immediate arrest of those involved in the harrowing mob assaults on two women who were paraded naked.

India's Virat Kohli celebrates after he scored a century against West Indies on day two of their second cricket Test match at Queen's Park in Port of Spain, Trinidad and Tobago, Friday, July 21, 2023. (AP Photo/Ricardo Mazalan)

West Indies is an uplifting 86-1 after Virat Kohli hit his first overseas century since 2018 for India on day two of the second test at Queen’s Park Oval.

A man, who is homeless, talks to Maribel Padilla, left, of the Brown Bag Coalition, after receiving a cold, wet towel, Thursday, July 20, 2023, in Calexico, Calif.  Once temperatures hit 113 degrees Fahrenheit (45 Celsius), Padilla and the Brown Bag Coalition meet up with people who are homeless in Calexico, providing them with cold, wet towels, and some refreshments to help them endure the scorching temperatures.  (AP Photo/Gregory Bull)

Landslides, wildfires, crop destruction and coral reef bleaching are part of ongoing fallout from this summer’s wild swings of extreme heat and storms intensified by climate change.

Indian Prime Minister Narendra Modi welcomes Sri Lankan President Ranil Wickremesinghe walk for a photo call before their delegation level meeting in New Delhi, India, Friday, July 21, 2023. (AP Photo/Manish Swarup)

Sri Lanka and India have signed a slew of energy, development and trade agreements, signaling the growing economic ties between the two neighboring countries.

Sabry said accepting the Indian rupee would work as an advantage for Sri Lanka as the trade imbalance between the two countries is in favor of India.

“We need more Indian currency, so more Indian people coming here and spending Indian currency is good for us,” Sabry told reporters a day after visiting India with Sri Lankan president Ranil Wickremesinghe.

During the visit, India and Sri Lanka signed a series of energy, development and trade agreements, signaling growing economic ties between the neighboring countries.

Relations between the two countries surged last year when Sri Lanka was mired in its worst economic crisis in modern history, triggered by a severe foreign currency crunch that saw essential items run out and citizens queue for fuel for days. It also suspended its repayment of foreign debt last year.

India provided critical financial and humanitarian assistance worth over $4 billion to its neighbour, including food, medicine and fuel.

India was also the first creditor to extend a letter of support towards Sri Lanka’s debt restructuring efforts that helped kickstart support from the IMF, which approved a $3 billion bailout package in March.

Sri Lanka’s total debt has exceeded $83 billion, of which $41.5 billion is foreign and $42.1 billion is domestic. Sri Lanka has now started the process of restructuring its debt.

Sri Lanka’s strategic location in the Indian Ocean has long attracted attention from regional rivals India and China. For years, free-flowing loans and infrastructure investments from Beijing helped it gain an upper hand against New Delhi in the quest for influence.

But the country’s economic collapse gave New Delhi an opportunity to swing the pendulum back in its favor, especially as China delayed its support for debt restructuring, experts say. China owns about 10% of Sri Lanka’s foreign debt.

.

Check Also

Rising tomato prices: The latest weapon against Muslims in India | Politics

“Who are the people who have increased the prices of vegetables now?” Himanta Biswa Sarma, …

Leave a Reply

Your email address will not be published. Required fields are marked *