The two governments are negotiating the change to expand economic cooperation, especially in the energy sector. It would be a way to overcome the exchange problems that the economic crisis has created. Several Sri Lankan banks have already opened special accounts that allow Indian currency to be traded directly.
Colombo () – India and Sri Lanka are discussing the adoption of the Indian rupee in commercial transactions as part of the expansion of cooperation, especially in the energy sector.
Pramod Kumar Mishra, Principal Secretary to Indian Prime Minister Narendra Modi, met in recent days in New Delhi with the High Commissioner of Sri Lanka Milinda Moragoda to continue the dialogue between the two countries with the aim of promoting bilateral trade. Meanwhile, the Indian Ministry of Finance has called on the Indian Banks Association (IBA) and the Federation of All India Export Organizations (FIEO) “to proceed with a campaign to raise awareness among stakeholders on the trade in rupees”.
Dasun Gunatillake, a senior manager at a state-owned bank, told that “a number of Sri Lankan banks have already opened special accounts for dealing in rupees, called Vostro accounts. In this way, Sri Lankans can now have ,000 in physical form and use Indian rupees for transactions with their Indian counterparts.”
Economic analyst Shirantha Jayamanne believes that “the designation of the Indian rupee as legal tender in Sri Lanka can provide the neighboring country with the liquidity support it needs to overcome the economic crisis that has caused the insufficient availability of US dollars.”
“In 2021-2022 Sri Lankan government economists issued banknotes to deal with the crisis, creating hard currency shortages and setting limits on outgoing remittances. Today Sri Lanka is a net recipient of remittances, like most of South Asian countries. Meanwhile, “the Indian rupee is used officially to settle transactions for Sri Lankans traveling to India, unofficially. The tickets are available on the black market,” Shirantha revealed.
According to academic Chaminda Hewapathirana, “The Central Bank of India has encouraged Sri Lankan banks to open VOSTRO accounts to settle transactions. After all, the Indian rupee was the ‘South Asian dollar’ and until 1950 Sri Lanka had a one-to-one exchange rate with the Indian rupee. The Sri Lankan rupee, like most South Asian currencies, is derived from the Indian rupee. It was tied to silver reserves, which later moved to gold, before macroeconomists got the power to print money at will with the regression of classical economics,” recalled Chaminda.
Sri Lankan Foreign Minister Ali Sabry also expressed the hope of “accepting the Indian currency as a common legal currency for work, in order to strengthen and integrate both economies and allow for people-to-people contacts and greater circulation of goods.”
