Sri Lanka Signals Use of Indian Rupee in local transactions

Sri Lanka is considering the use of the Indian rupee for local transactions to strengthen its economy as well as economic ties with India.

Sri Lankan Foreign Minister Ali Sabry signaled the benefits, stating, “We need more Indian currency, so more Indian people coming here and spending Indian currency is good for us.”

With the country’s debt exceeding a massive $83 billion, Sri Lanka has begun the process of debt restructuring. The bilateral trade between India and Sri Lanka was valued at $5.45 billion in 2021, reflecting the growing economic relationship.

During Sri Lankan President Ranil Wickremesinghe’s recent visit to India, the two nations signed crucial energy, development, and trade agreements, further strengthening their ties.

Emphasizing the trade balance, Sabry further said that accepting the Indian rupee for local transactions would work as an advantage for Sri Lanka as the trade imbalance between the two countries is in favor of India.

Notably, India was the first to support Sri Lanka’s debt restructuring efforts, leading to IMF’s approval of a $3 billion bailout package in March.

Interestingly, even before the Ukraine crisis, neighboring nations like Maldives, Sri Lanka, and occasionally Bangladesh expressed interest in trading in the Indian rupee or establishing a common ‘South Asian currency.’ While the idea was advocated by former Presidents of Maldives and Sri Lanka in SAARC summits and bilateral talks with the Indian leadership, it did not receive a positive response at the time.