COLOMBO Sri Lanka's cabinet has approved the signing of a trade agreement with Indonesia in March (next year), a government official said on Tuesday, as the island seeks to revive its crisis-hit economy, following a severe foreign exchange crunch in 2022.

Talks between the countries on the preferential trade agreement started earlier this year and will conclude in December, said cabinet spokesperson and Transport Minister Bandula Gunawardana.

“Expanding trade ties with other countries is essential to promoting Sri Lanka’s growth and help it recover from the crisis,” he told reporters at a weekly cabinet briefing.

Helped by a US$2.9 billion International Monetary Fund (IMF) programme, Sri Lanka is expected to post a 3% economic growth this year, after the economy contracted 2.3% last year and shrank 7.3% in 2022, at the height of the crisis.

Sri Lanka signed a free trade agreement with Thailand earlier this year, and is in talks with Malaysia, India and Vietnam to set up fresh trade deals.

Two-way trade between Sri Lanka and Indonesia was worth about US$424 million in 2023, data from Sri Lanka’s Export Development Board showed. Sri Lanka exports mainly knitted fabrics and chemical products to Indonesia and imports coconut oil, tobacco and paper.

  - Reuters