Sri Lanka is exploring the possibility of adopting the Indian rupee as a valid currency within its borders, aiming to facilitate seamless business transactions for Indian tourists visiting the country. Foreign Affairs Minister Ali Sabry revealed this proposal, drawing inspiration from the successful approach taken with Singapore. The matter was discussed during President Ranil Wickremesinghe’s two-day official visit to India. Minister Sabry emphasized the vision of an India-Sri Lanka Economic Partnership, with the goal of leveraging the development opportunities in the Indian Ocean region, known as the world’s largest emerging economic zone.
The move to accept the Indian rupee for local transactions comes as Sri Lanka grapples with rebuilding its depleted foreign reserves and recovering from last year’s unprecedented economic crisis. By allowing the use of its giant neighbor’s currency, Sri Lanka aims to ease the burden of multiple currency conversions for tourists and individuals from India, who constitute a significant portion of the island nation’s imports.
India is Sri Lanka’s largest trading partner, and trade between the two countries amounted to $5.45 billion in 2021.
Foreign Minister Sabry highlighted that accepting the Indian rupee would be advantageous for Sri Lanka due to the trade imbalance favoring India. The country relies on Indian currency to meet its needs, making it beneficial for more Indian people to visit Sri Lanka and spend their currency there. The recent visit by President Ranil Wickremesinghe to India further strengthened economic ties between the neighboring nations, resulting in the signing of energy, development, and trade agreements.
India’s crucial financial and humanitarian assistance during Sri Lanka’s economic crisis further strengthened the bilateral relations. Sri Lanka faced severe foreign currency crunch and foreign debt repayment issues, leading to its worst economic crisis in modern history. With India’s support, Sri Lanka managed to kickstart its debt restructuring efforts and secured a $3 billion bailout package from the International Monetary Fund (IMF). As Sri Lanka moves forward with the debt restructuring process, its strategic location in the Indian Ocean continues to attract attention from regional rivals India and China, with both countries seeking to exert influence in the region.