Move to designate INR yet to spark interest among importers and exporters

Dr. Nandalal Weerasinghe
PIC BY PRADEEP PATHIRANA

• Central Bank chief says demand for INR among Lankan importers and exporters remains tepid
• Says transactions are still largely happening in US dollars 
• India remains Sri Lanka’s largest trading partner and largest source market for tourism

Despite Sri Lanka making the Indian rupee (INR) a designated currency in August and several local banks opening up INR nostro accounts, the demand for INR among Lankan importers and exporters remains tepid, according to Central Bank Governor Dr. Nandalal Weerasinghe.

“Some commercial bankers told us that there is still no big demand for Indian rupee-denominated trade. A number of Sri Lankan banks have opened up nostro accounts with some Indian banks. But still transactions are largely happening in US dollars,” Dr. Weerasinghe told a press briefing, last week.
“It (demand for INR) has to come from importers and exporters,” he added.

Designating INR as an official foreign currency not only facilitates trade settlements between the two nations in INR but also allows Indian tourists visiting Sri Lanka to conduct transactions using INR.
India remains Sri Lanka’s largest trading partner and as per the latest data available on the Sri Lanka Commerce Department website, Sri Lanka’s total exports to India in 2021 stood at US $ 816 million and total imports from India stood at US $ 4.42 billion.

The majority of Sri Lanka’s exports to India are channelled through the India-Sri Lanka Free Trade Agreement (ISFTA). In 2021, Sri Lanka’s exports to India through the ISFTA amounted to US $ 526 million.

Imports from India through the ISFTA stood at US $ 209 million in 2021.

Sri Lanka and India are expected to resume talks shortly to extend the current ISFTA to the Economic and Trade Cooperation Agreement (ETCA), which will cover trade-in services and the services sector.
India continues to be the primary source of tourists for Sri Lanka, with 200,310 Indian tourists having visited the country from January 01, 2023 to September 30, 2023.

Other designated foreign currencies in Sri Lanka are Australian dollar, Canadian dollar, Chinese renminbi, Danish kroner, euro, Hong Kong dollar, Japanese yen, New Zealand dollar, Norwegian kroner, Pound sterling, Singapore dollar, Swedish kroner, Swiss franc, Thai baht and United States dollar.