Sri Lanka likely to allow Indian rupee to be used in local transactions: Report

Amid the island nation's struggles to build its depleted foreign reserves and to emerge from last year’s unprecedented economic crisis, Sri Lanka is mulling the possibility of allowing the use of the Indian rupee for local transactions, reported AP.

The move to allow the use of India'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, said Sri Lankan Foreign Minister Ali Sabry said Saturday.

According to official figures, the trade between the two nations stood at $5.45 billion in 2021. Sri Lanka imports plenty of items from India including food, pharmaceuticals, construction materials, automobiles, fertilizers, and chemicals.

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, Sabry said, “We need more Indian currency, so more Indian people coming here and spending Indian currency is good for us."

Earlier, Sri Lankan president Ranil Wickremesinghe visited India and during the visit, India and Sri Lanka signed a series of energy, development, and trade agreements, signaling growing economic ties between the neighboring countries.

In 2022, India provided critical financial and humanitarian assistance worth over $4 billion to its neighbor, including food, medicine, and fuel. Apart from this, 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.

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.

With agency inputs.