India and Sri Lanka are considering the use of Indian Rupee (INR) for economic transactions to build a stronger and closer partnership through trade and investment-led measures. The High Commission of India organized a discussion on the topic, with representatives from the Bank of Ceylon, State Bank of India, and Indian Bank sharing their experiences.
Furthermore, the participating banks outlined the benefits of settlements denominated in Indian Rupee (INR), including shorter timelines, lower exchange costs, and easier availability of trade credits.
The beneficial impact of this initiative on the tourism and hospitality industry was also highlighted, along with its role in increasing collections that could be utilized by other sectors. The High Commissioner of India to Sri Lanka emphasized the positive impact this initiative will have on building a stronger and closer economic partnership between the two countries.
Sri Lanka’s Finance Minister expressed appreciation for the close economic relationship between the two countries and the financial and humanitarian support extended by India over the past year, including the strong financing assurances provided by New Delhi in the context of the IMF support program for Sri Lanka.
India extended assistance worth over USD 3.8 billion to Sri Lanka last year to help it deal with the economic crisis.
Governor of the Central Bank of Sri Lanka called for expanding this facility over time to utilize it for the full range of capital and current account transactions. A team from the Reserve Bank of India (RBI) joined the discussion in the online format and indicated the possibility of settlement of current account transactions in goods and services in INR. The RBI team referred to the close cooperation with CBSL and RBI’s commitment to further facilitate this process.
Sri Lanka faced 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 approved a USD 2.9 billion bailout package for Sri Lanka in September 2022, pending Sri Lanka’s ability to restructure its debt with creditors. With assurances from creditors, the USD 2.9 billion facilities could get the IMF board approval in March.
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