Free Trade Agreement with India by Year-end, Says Sri Lankan Foreign Minister

Sri Lanka on Tuesday said it has plans to establish a free trade agreement with India by the end of 2024, Foreign Minister Ali Sabry said here as the cash-strapped island nation tries to spur economic growth.

Similar Free Trade Agreements (FTAs) would be worked out for Indonesia, Malaysia, Vietnam, and China too by the year’s end, Sabry told reporters here.

These agreements will open up new markets for the cash-strapped Sri Lankan businesses, contributing directly to the nation’s economic growth. The government continues to struggle to restructure its external debt on the one hand and has raised utility rates and taxes on the other.

Sri Lanka and India resumed talks on the Economic and Technology Cooperation Agreement in Colombo at the 12th round in October last year. The original talks were stalled after several rounds of talks between 2016 and 2018 due to political and trade union opposition.

Last week, Sri Lanka inked an FTA with Thailand. “This has already provided Sri Lanka access to a USD 2.2 billion market, representing a significant advancement,” the foreign minister said.

“In the 1990s, exports contributed a significant 30 per cent to Sri Lanka’s GDP, compared to 15 per cent today,” Sabry said adding, “This decline reflects a missed opportunity to capitalise on the global market, unlike neighbouring countries that actively pursued FTAs.” “The main reason behind Sri Lanka’s export struggles is its limited market access. While focusing primarily on the domestic market, countries like Vietnam and Bangladesh actively expanded into larger international markets through FTAs. This strategic move fuelled their export-driven growth, leaving Sri Lanka behind,” Sabry added.

In April 2022, after Sri Lanka declared its first-ever sovereign default since gaining independence from Britain in 1948, the then President Gotabaya Rajapaksa was thrown out through a public agitation and the incumbent President Ranil Wickremesinghe took over. He put in place unpopular economic reforms to supplement a bailout from the International Monetary Fund (IMF).