Sri Lanka plans to settle a debt for previous oil imports from Iran by means of paying it off in tea, a authorities minister said.
Ramesh Pathirana stated his united states of america hoped to ship $5m (£3.8m) really worth of tea to Iran every month to clear a $251m debt.
Sri Lanka is experiencing a extreme debt and overseas alternate crisis, which has been made worse by way of the loss of vacationer profits at some point of the coronavirus pandemic.
A member of the country’s tea board stated it was once the first time tea had been bartered to settle overseas debt.
Mr Pathirana stated the approach of price would no longer violate United Nations or American sanctions, due to the fact tea used to be labeled as a meals object on humanitarian grounds, and no black-listed Iranian banks would be involved.
“We hope to ship $5m well worth of tea every month to repay Iran for oil purchases pending considering the fact that the closing 4 years,” he advised Reuters
The Plantation Ministry said: “The endorsed scheme will keep Sri Lanka much-needed overseas foreign money on the grounds that the contract to Iran would be made in Sri Lankan rupees via the sale of Ceylon Tea.”
But a spokesperson for the Planters’ Association of Ceylon, which consists of all the foremost plantation businesses in Sri Lanka, stated this mode of transaction was once a “[sticking] plaster answer by means of the government”.
“It would not always advantage exporters as we will be paid in rupees, circumventing the free market, and offers no actual fee to us,” delivered Roshan Rajadurai.
Sri Lanka is said to have to meet about $4.5bn in debt repayments subsequent year, starting with a $500m global sovereign bond compensation in January.
However, the country’s overseas reserves diminished to $1.6bn at the cease of November, present day records from the central financial institution showed.
Central Bank Governor Ajith Nivard Cabraal stated beforehand this month that Sri Lanka is assured of being capable to “seamlessly” repay all sovereign debt that comes due in 2022.
Sri Lanka produces about 340m kg of tea annually. Last 12 months it exported 265.5 million kg, with income of $1.24bn in 2020.
Almost 5% of the populace of Sri Lanka work in the billion-dollar industry, choosing leaves on the mountain slopes and processing the tea in plantation factories.