Ray of hope for Sri Lanka as India likely to begin trading with crisis-hit island nation in rupee

NEW DELHI:  India sees a ray of hope in Sri Lanka with the election of Ranil Wickremesinghe as the President of the island nation caught in economic bankruptcy and subsequent social unrest. 

India, which is their biggest lender to that country, will continue to support it with renewed emphasis on trade. Recently, the Governor of the Central Bank of Sri Lanka (CBSL) in an interaction with the Indian CEO Forum (ICF) spoke about introducing the Indian rupee as foreign exchange for transactions in that country.

“Members of the board of the ICF met the CBSL Governor and discussed ways to address the economic recovery. The Governor looked forward to strengthening bilateral trade with the introduction of the Indian rupee as accepted foreign currency for transactions,’’ tweeted Manoj Gupta, MD of Lanka IOC, a wholly owned subsidiary of Indian Oil Corporation in Sri Lanka.

The Lanka IOC has also said that due to excessive applications and limited browsers, they have discontinued the registration of new customers for the supply of diesel against dollar payments.

It has not been ascertained whether this has anything to do with the possibility of using the rupee as foreign exchange subsequently. 

Manoj Gupta wasn’t available for comment despite several attempts. Meanwhile, speculation is rife on the Sri Lankan rupee being substituted for the Indian rupee for transactions in some sectors.

Sources say since Ranil Wickremesinghe is viewed as a friend of India, there is every possibility of INR trading getting the go-ahead.

“Indian investments in Sri Lanka continue to contribute towards economic recovery and resumption of growth. Their innovative ideas and wholehearted efforts serve as force multipliers for the bilateral multi-dimensional partnership,’’ said the Indian High Commission in Colombo.

India has emerged as the top lender to Sri Lanka during the first four months of 2022. It has extended credit worth $376.9 million, way above $67.9 million from China. India has also extended a $3.8 billion credit line to Sri Lanka to be used for emergency purchases of fuel, food and medicines, deferral payments to the Asian Clearing Union and a currency swap.

Trade between India and Sri Lanka has dropped drastically due to the economic and political turmoil. Terms and conditions are being explored on how Indian exporters can buy and sell products from the island nation using the Indian rupee.

In addition to being one of the largest trade partners of Sri Lanka, India is also one of the largest contributors to foreign direct investment.

The main investments from India are in the areas of petroleum retail, tourism, manufacturing, real estate, telecommunication, banking and financial services.

Meanwhile, the IMF hopes to complete the negotiations with Sri Lanka on a bailout package "as quickly as possible" and the "moment there is a government" in the country, its Managing Director Kristalina Georgieva said on Wednesday, hours after the crisis-hit island nation elected a new president.

Sri Lanka has been gripped by severe shortages of fuel, food and other essentials after its foreign reserves dried up.

Citizens have turned their anger on the government and forced once-powerful President Gotabaya Rajapaksa to resign last week.

On Wednesday, the Sri Lankan Parliament elected Acting President Ranil Wickremesinghe as his replacement.

"IMF hopes to complete negotiations with Sri Lanka "as quickly as possible, & the moment there is a govt we can continue our discussions & our team will be there," Georgieva said, Hiru News reported.

Wickremesinghe in his previous capacity as prime minister and finance minister has been involved in negotiations with the Washington-based International Monetary Fund (IMF).

Sri Lanka's large creditors include Japan, China and India.

The worst economic crisis since Sri Lanka gained independence in 1948 also sparked a political crisis in the country after a popular uprising against the government of Rajapaksa.

Sri Lanka needs about USD 5 billion in the next six months to cover basic necessities for its 22 million people, who have been struggling with long queues, worsening shortages and power cuts.

The country's inflation topped 50 per cent in June after two years of money printing and an attempted float botched with a surrender requirement which sent the rupee sliding to 360 to the US dollar from 200.

The economic crisis also sparked a political crisis in the country after a popular uprising against the government.

Credit lifeline for the neighbour

India has emerged as the top lender to Sri Lanka during the first four months of 2022. It has extended credit worth $376.9 million, much more than $67.9 million from China.

India has also extended a $3.8 billion credit line to Sri Lanka to be used for emergency purchases of fuel, food and medicines, deferral payments to the Asian Clearing Union and a currency swap.

In addition to being one of the largest trade partners of Sri Lanka, India is also one of the largest contributors to FDI, mainly in petroleum, tourism, manufacturing, real estate, telecom, banking and financial services.

(With PTI Inputs)

NEW DELHI:  India sees a ray of hope in Sri Lanka with the election of Ranil Wickremesinghe as the President of the island nation caught in economic bankruptcy and subsequent social unrest.  India, which is their biggest lender to that country, will continue to support it with renewed emphasis on trade. Recently, the Governor of the Central Bank of Sri Lanka (CBSL) in an interaction with the Indian CEO Forum (ICF) spoke about introducing the Indian rupee as foreign exchange for transactions in that country. ALSO READ | Sparks fly at all-party meet on Sri Lanka crisis as Jaishankar hits out at 'culture of freebies' “Members of the board of the ICF met the CBSL Governor and discussed ways to address the economic recovery. The Governor looked forward to strengthening bilateral trade with the introduction of the Indian rupee as accepted foreign currency for transactions,’’ tweeted Manoj Gupta, MD of Lanka IOC, a wholly owned subsidiary of Indian Oil Corporation in Sri Lanka. The Lanka IOC has also said that due to excessive applications and limited browsers, they have discontinued the registration of new customers for the supply of diesel against dollar payments. It has not been ascertained whether this has anything to do with the possibility of using the rupee as foreign exchange subsequently.  Manoj Gupta wasn’t available for comment despite several attempts. Meanwhile, speculation is rife on the Sri Lankan rupee being substituted for the Indian rupee for transactions in some sectors. Sources say since Ranil Wickremesinghe is viewed as a friend of India, there is every possibility of INR trading getting the go-ahead. ALSO READ | China's debt trap diplomacy responsible for economic calamity in Sri Lanka “Indian investments in Sri Lanka continue to contribute towards economic recovery and resumption of growth. Their innovative ideas and wholehearted efforts serve as force multipliers for the bilateral multi-dimensional partnership,’’ said the Indian High Commission in Colombo. India has emerged as the top lender to Sri Lanka during the first four months of 2022. It has extended credit worth $376.9 million, way above $67.9 million from China. India has also extended a $3.8 billion credit line to Sri Lanka to be used for emergency purchases of fuel, food and medicines, deferral payments to the Asian Clearing Union and a currency swap. Trade between India and Sri Lanka has dropped drastically due to the economic and political turmoil. Terms and conditions are being explored on how Indian exporters can buy and sell products from the island nation using the Indian rupee. In addition to being one of the largest trade partners of Sri Lanka, India is also one of the largest contributors to foreign direct investment. The main investments from India are in the areas of petroleum retail, tourism, manufacturing, real estate, telecommunication, banking and financial services. Meanwhile, the IMF hopes to complete the negotiations with Sri Lanka on a bailout package "as quickly as possible" and the "moment there is a government" in the country, its Managing Director Kristalina Georgieva said on Wednesday, hours after the crisis-hit island nation elected a new president. Sri Lanka has been gripped by severe shortages of fuel, food and other essentials after its foreign reserves dried up. Citizens have turned their anger on the government and forced once-powerful President Gotabaya Rajapaksa to resign last week. On Wednesday, the Sri Lankan Parliament elected Acting President Ranil Wickremesinghe as his replacement. "IMF hopes to complete negotiations with Sri Lanka "as quickly as possible, & the moment there is a govt we can continue our discussions & our team will be there," Georgieva said, Hiru News reported. Wickremesinghe in his previous capacity as prime minister and finance minister has been involved in negotiations with the Washington-based International Monetary Fund (IMF). Sri Lanka's large creditors include Japan, China and India. ALSO READ | Indian official injured in crisis-hit Sri Lanka, High Commission urges citizens to make movements safely The worst economic crisis since Sri Lanka gained independence in 1948 also sparked a political crisis in the country after a popular uprising against the government of Rajapaksa. Sri Lanka needs about USD 5 billion in the next six months to cover basic necessities for its 22 million people, who have been struggling with long queues, worsening shortages and power cuts. The country's inflation topped 50 per cent in June after two years of money printing and an attempted float botched with a surrender requirement which sent the rupee sliding to 360 to the US dollar from 200. The economic crisis also sparked a political crisis in the country after a popular uprising against the government. Credit lifeline for the neighbour India has emerged as the top lender to Sri Lanka during the first four months of 2022. It has extended credit worth $376.9 million, much more than $67.9 million from China. India has also extended a $3.8 billion credit line to Sri Lanka to be used for emergency purchases of fuel, food and medicines, deferral payments to the Asian Clearing Union and a currency swap. In addition to being one of the largest trade partners of Sri Lanka, India is also one of the largest contributors to FDI, mainly in petroleum, tourism, manufacturing, real estate, telecom, banking and financial services. (With PTI Inputs)