Rupee trade with India could lift bilateral commerce by 40% in two years: EDB Chief

Export Development Board (EDB) Chairman Mangala Wijesinghe yesterday said Sri Lanka expects rupee-to-rupee trade with India to significantly boost bilateral commerce, with authorities targeting around a 30% to 40% increase in trade exchanges within two years and a 15% to 20% rise in the first year of implementation.

Addressing the media, he described the initiative as a progressive step that would reduce transaction costs, eliminate currency conversion losses, and lessen dependence on the US dollar for bilateral trade.

“It reduces pressure on scarce hard currency reserves, preserving dollars for uses where they are truly necessary, while rupee-to-rupee trade flows freely between our two economies,” he said.

The initiative forms part of a broader effort by both countries to deepen economic integration and facilitate trade settlements directly in Indian Rupees (INR) and Sri Lankan Rupees (LKR), reducing exposure to exchange rate volatility and global dollar liquidity pressures.

According to Wijesinghe, the Indian High Commission in Colombo is actively supporting the initiative and is working closely with the Central Bank of Sri Lanka (CBSL) to strengthen trade-related financial transactions between the two countries.

“We have already noticed a favourable response,” he said, noting that discussions on increasing the use of local currencies in bilateral trade have been ongoing among local banks. 

The EDB Chairman said the mechanism would help reduce demand for US dollars, while contributing to greater exchange rate stability.

Momentum behind the initiative was evident last week when policymakers, bankers, exporters,, and business leaders gathered for a high-level roundtable titled “Rupee to Rupee: Strengthening the India-Sri Lanka Commercial Corridor,” held under the patronage of Indian High Commissioner Santosh Jha and CBSL Governor Dr. Nandalal Weerasinghe (https://www.ft.lk/front-page/Sri-Lanka-and-India-set-sights-towards-Rupee-converted-6-b-trade/44-793343).

Participants included representatives from Sri Lankan banks, exporters, importers, chambers of commerce, members of the India CEO Forum, and policy think tanks.

A key feature highlighted at the event was the growing ability of financial institutions to support trade directly in INR. Indian banks operating in Colombo can now lend in INR to Sri Lankan importers purchasing Indian goods, while Sri Lankan banks can also borrow in INR to finance trade transactions without requiring dollar conversions.

“This is a good opportunity for us to promote important facilitation of trade between India and Sri Lanka,” Wijesinghe said.

The push for local currency settlement comes as economic ties between the two neighbours continue to deepen.

India has now emerged as Sri Lanka’s second-largest export destination, overtaking the UK, with annual exports exceeding $ 1 billion. At the same time, Sri Lanka imports nearly $ 5 billion worth of goods from India annually. A significant component of that trade relationship is linked to manufacturing supply chains, particularly apparel. 

Wijesinghe noted that around $ 2.6 billion worth of raw materials used by Sri Lanka’s garment sector are imported from India each year.

The development reflects a growing degree of economic interdependence between the two countries and underscores the importance of reducing transaction costs and payment frictions.

The rupee-trade initiative comes amid renewed efforts to expand bilateral trade and investment ties, highlighted on Tuesday as the two countries marked 25 years of the India-Sri Lanka Free Trade Agreement (ISFTA) and launched the Indo-Lanka Chamber of Commerce and Industry (ILCCI) India Desk, which will be operated by Global Investment and Trade Advisors (GITA), an Indian trade and investment promotion agency (https://www.ft.lk/front-page/India-Desk-launch-signals-push-to-reboot-Sri-Lanka-India-economic-ties/44-793696).

The Desk is expected to provide Sri Lankan businesses with regulatory guidance, market intelligence, and structured engagement opportunities to help them navigate and access the Indian market more effectively.