International

Sri Lanka Repays $20 Million Oil Debt to Iran with Tea Exports

Colombo, Sri Lanka- Cash-strapped Sri Lanka has taken a step towards alleviating its financial woes by exporting tea worth $20 million to Iran, as part of efforts to partially settle its $251 million oil debts. The agreement, which saw Sri Lankan Prime Minister Dinesh Gunawardena in talks with Iranian Foreign Minister Hossein Amir-Abdollahian, has garnered positive feedback from Tehran.

The tea-for-oil deal, done in December 2021, faced delays due to Sri Lanka’s economic crisis, exacerbated by the resignation of then-president Gotabaya Rajapaksa in July 2022. This innovative barter arrangement enables Iran, grappling with sanctions, to obtain Sri Lanka’s renowned tea without exhausting its limited foreign reserves.

Sri Lanka’s participation in the deal stems from its acute shortage of foreign currency, a consequence of its default on a $46 billion foreign debt in April 2022. To address its financial turmoil, Sri Lanka secured a $2.9 billion bailout from the International Monetary Fund (IMF) early last year.

Ceylon tea, historically significant and esteemed globally, has been a cornerstone of Sri Lanka’s exports, particularly to Iran, where it constituted a significant portion of tea consumption in 2016. However, recent years have seen a decline in its market share.

As Sri Lanka navigates its economic challenges, this tea-for-oil initiative underscores the nation’s innovative solutions to address debt obligations while leveraging its valuable export resources.

Sri Lanka

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