Sri Lanka, Iran in talks for banking deal, direct flights and refinery

ECONOMYNEXT – Sri Lanka’s President Maithripala Sirisena had talks with Iranian President Hassan Rouhani on upgrading the country’s refinery, starting direct flights and coming up with a deal to make banking transactions easier, a statement said.

President Sirisena is on a two day state visit to Iran.

Sri Lanka has been a long-term buyer of Iranian light crude, but the two countries have had difficulties over international sanctions, especially in remitting money. Banks in sanctions busting countries can get locked out of the dollar based settlement system.

Though sanctions were relaxed under an international deal, US President Donald Trump pulled out of the deal, casting uncertainty over the deals.

President Sirisena had discussed the need for a effective banking channel to enable transactions within the two countries.

Despite oil export being allowed, Iran’s central bank has been printing money, leading to steep falls of the Rial.

Sri Lanka and Iran are also in the Asian Clearing Union, an arrangement used by several Asian countries with imprudent central banks that regularly run short of hard currency due to money printing.

The countries established the system in 1974, as their central banks were clueless on how to handle the break-up of the Bretton Woods, analysts say. (Colombo/May13/2018)

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