COLOMBO, Sri Lanka (AP) \u2014 Sri Lanka is considering the possibility of allowing the use of the Indian rupee for local transactions, as the island nation struggles to build its depleted foreign reserves and to emerge from last year\u2019s unprecedented\u00a0economic crisis.<\/p>\n\n\n\n
Sri Lankan Foreign Minister Ali Sabry said Saturday the move to allow the use of its giant neighbor\u2019s currency would enable \u201ctourists and other people from India to directly use Indian rupees here\u201d without going through the hassle of multiple currency conversions.<\/p>\n\n\n\n
Sri Lanka imports plenty of items from India \u2014 its largest trading partner \u2014 including food, pharmaceuticals, construction materials, automobiles, fertilizers and chemicals. Trade between the two nations stood at $5.45 billion in 2021, according to official figures.<\/p>\n\n\n\n
Sabry said accepting the Indian rupee would work as an advantage for Sri Lanka as the trade imbalance between the two countries is in favor of India.<\/p>\n\n\n\n
\u201cWe need more Indian currency, so more Indian people coming here and spending Indian currency is good for us,\u201d Sabry told reporters a day after visiting India with Sri Lankan president Ranil Wickremesinghe.<\/p>\n\n\n\n
During the visit, India and Sri Lanka signed a series of energy, development and trade agreements, signalling growing economic ties between the neighboring countries.<\/p>\n\n\n\n
Relations between the two countries surged last year when Sri Lanka was mired in its worst economic crisis in modern history, triggered by a severe foreign currency crunch that saw essential items run out and citizens queue for fuel for days. It also suspended its repayment of foreign debt last year.<\/p>\n\n\n\n
India provided critical financial and humanitarian assistance worth over $4 billion to its neighbor, including food, medicine and fuel.<\/p>\n\n\n\n
India was also the first creditor to extend a letter of support towards Sri Lanka\u2019s debt restructuring efforts that helped kickstart support from the IMF, which\u00a0approved a $3 billion bailout package\u00a0in March.<\/p>\n\n\n\n
Sri Lanka\u2019s total debt has exceeded $83 billion, of which $41.5 billion is foreign and $42.1 billion is domestic. Sri Lanka has now started the process of restructuring it\u2019s debt.<\/p>\n\n\n\n
Sri Lanka\u2019s strategic location in the Indian Ocean has long attracted attention from regional rivals India and China. For years, free-flowing loans and infrastructure investments from Beijing helped it gain an upper hand against New Delhi in the quest for influence.<\/p>\n\n\n\n
But the country\u2019s\u00a0economic collapse gave New Delhi an opportunity\u00a0to swing the pendulum back in its favor, especially as China delayed its support for debt restructuring, experts say. China owns about 10% of Sri Lanka\u2019s foreign debt.<\/p>\n\n\n\n
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