COLOMBO (Dispatches) – Iran and Sari Lanka have signed an agreement on working out ways to settle the latter’s oil debt to Iran.
Chairman of Trade Promotion Organization of Iran Ali-Reza Peimanpaak and minister of trade of Sari Lanka Ramesh Pathirana signed the agreement in a meeting, according to the Wednesday report of Iran’s Embassy in Colombo, the commercial capital of Sri Lanka.
Peimanpaak, who is also a deputy for the Ministry of Industry, Mines and Trade, arrived in Colombo early as his first trade destination to East Asia.
Based on mutual agreement, Sri Lanka will monthly export tea to Iran to repay parts of its oil debt to the country, Peimanpaak underlined.
The issue of Sri Lanka’s oil debts to Iran remained unsolved for years until the visit.
During his stay in Sri Lanka, Peimanpaak held talks with several officials there and reviewed ways to develop economy and make use of the existing opportunities.
Ramesh Pathirana said his country hoped to send $5mn worth of tea to Iran each month to clear a $251mn debt.
Sri Lanka is experiencing a severe debt and foreign exchange crisis, which has been made worse by the loss of tourist income during the coronavirus pandemic.
A member of the country’s tea board said it was the first time tea had been bartered to settle foreign debt.
Pathirana said, “We hope to send $5mn worth of tea each month to repay Iran for oil purchases pending since the last four years.”
The Plantation Ministry said: “The recommended scheme will save Sri Lanka much-needed foreign currency since the settlement to Iran would be made in Sri Lankan rupees through the sale of Ceylon Tea.”
Sri Lanka is reported to have to meet about $4.5bn in debt repayments next year, starting with a $500mn international sovereign bond repayment in January.
However, the country’s foreign reserves dwindled to $1.6bn at the end of November, latest data from the central bank showed.
Central Bank Governor Ajith Nivard Cabraal said earlier this month that Sri Lanka is confident of being able to “seamlessly” repay all sovereign debt that comes due in 2022.