NEW DELHI: With Ranil Wickremesinghe being elected as the President of Sri Lanka comes the hope of economic recovery and resumption of growth for the island nation.
India, which is their biggest lender, will continue to support Sri Lanka 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), talked about introducing the Indian Rupee as the accepted foreign exchange for transactions in Sri Lanka.
"Members of the board of the ICF met the Governor of CBSL and discussed ways to address the economic recovery. The Governor thanked the Indian government and looked forward to strengthen bilateral trade with the introduction of 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.
Interestingly, Lanka IOC has also said that due to excessive applications, they have discontinued registration of new customers for supplies of diesel against dollar payments. It has not been ascertained whether this has anything to do with the possibility of using Indian Rupee as foreign exchange subsequently. Manoj Gupta, despite repeated attempts wasn't available for any comments.
Meanwhile, speculations have been rife for a while that the Sri Lankan rupee will be substituted with the Indian Rupee for transactions in some sectors.
Sources say that the election of the new President will bring about some stability and since Ranil Wickremesinghe is viewed as a friend of India, there is every possibility of trading in INR getting a go-ahead soon.
"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-dimentional partnership," said the Indian High Commission in Colombo.
Credit lifeline for the neighbour
India has emerged as the top lender to Sri Lanka during the first four months of 2022 and has extended credit worth $376.9 million, which is much more than the $67.9 million from China.
India has also extended $3.8 billion as economic support to Sri Lanka, which includes a Line of Credit (LOC) 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 crisis and political turmoil. As a result, exporters are anxious and trying to get a grip on the situation. 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 and hotel, manufacturing, real estate, telecommunication, banking and financial services.