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

Sri Lanka announced on Wednesday, February 21, that it successfully exported tea worth USD 20 million to Iran as part of its efforts to partially settle the outstanding USD 251 million oil debts. The statement, released by the office of Prime Minister Dinesh Gunawardena, highlighted the satisfaction expressed by Iranian Foreign Minister Hossein Amir-Abdollahian during discussions regarding the deal.

The tea-for-oil agreement, established in December 2021, faced delays in exports due to Colombo’s economic crisis, leading to the resignation of then-President Gotabaya Rajapaksa in July 2022. The barter trade arrangement enables sanctions-affected Iran to acquire sought-after tea without utilizing scarce hard currency for payment. Simultaneously, it allows Sri Lanka to address its foreign currency shortage by using tea as a form of payment.

The island nation defaulted on its $46 billion foreign debt in April 2022 but subsequently secured a USD 2.9 billion bailout from the International Monetary Fund (IMF) in the early part of the following year.

Ceylon tea, recognized by the island’s colonial-era name, constituted nearly half of Iran’s tea consumption in 2016. Although the proportion has diminished in recent years, the successful tea exports signify progress in mitigating financial challenges and strengthening economic ties between the two nations.

Source: AFP

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