- India and Sri Lanka are exploring the possibility of using the Indian Rupee for economic transactions.
- Sri Lanka is considering the possibility of allowing the usage of the Indian rupee for local transactions just like the dollar, euro, and yen.
- Sri Lanka was hit by an unprecedented financial crisis in 2022, the worst since its independence from Britain in 1948, due to a severe paucity of foreign exchange reserves.
- The IMF in September last year approved Sri Lanka a USD 2.9 billion bailout package over 4 years pending Sri Lanka’s ability to restructure its debt with creditors.
India and Sri Lanka are exploring the possibility of using the Indian Rupee for economic transactions and have discussed the initiative that will help in building a stronger and closer partnership through trade and investment-led measures between the two countries.
The High Commission of India here organized a discussion on the use of the Indian Rupee (INR) for transactions between India and Sri Lanka. “Representatives from the Bank of Ceylon, State Bank of India, and the Indian Bank shared their experiences and informed the audience that they had started carrying out INR-denominated trade transactions through respective Vostro/Nostro accounts after the creation of enabling framework by the Reserve Bank of India (RBI) and the Central Bank of Sri Lanka (CBSL) in 2022,” the High Commission said in a statement.
Sri Lanka is considering the possibility of allowing the usage of the Indian rupee for local transactions just like the dollar, euro, and yen to facilitate Indian tourists and businessmen, Foreign Minister Ali Sabry said. Sabry was briefing the media here on President Ranil Wickremesinghe’s visit to India on July 20-21, his first since assuming office last year. He held talks with Prime Minister Narendra Modi.
Two countries noted that the decision to designate INR as currency for trade settlements between the two countries has forged stronger and mutually beneficial commercial linkages, and agreed to operationalize the Unified Payments Interface-based digital payments for further enhancing trade and transactions between businesses and common people.
The two countries signed the Network-to-Network Agreement between NIPL and Lanka Pay for UPI application acceptance in Sri Lanka after bilateral talks between Modi and Wickremesinghe. On an MoU signed with India on the development of Trincomalee as a regional hub for industry, energy, and bilateral cooperation, Sabry saw no objections coming from China.
A team from RBI joined the discussion in the online format and indicated the possibility of settlement of current account transactions in goods, as well as services, in INR, apart from the option of undertaking permitted capital account transactions. The RBI team referred to the close cooperation with CBSL and RBI’s commitment to further facilitate this process, it said.
Sri Lanka was hit by an unprecedented financial crisis in 2022, the worst since its independence from Britain in 1948, due to a severe paucity of foreign exchange reserves, sparking political turmoil in the country which led to the ouster of the all-powerful Rajapaksa family.
The IMF in September last year approved Sri Lanka a USD 2.9 billion bailout package over 4 years pending Sri Lanka’s ability to restructure its debt with creditors, both bilateral and sovereign bondholders. With assurances from creditors, the USD 2.9 billion facilities could get the IMF board approval in March.
(With inputs from agencies)
