COLOMBO, Sri Lanka — In an effort to enhance trade and investment, Sri Lanka, facing economic challenges, has finalized a free trade agreement with Thailand. This agreement, signed in Colombo on Saturday, aims to facilitate recovery from the severe economic downturn Sri Lanka experienced two years prior. The Sri Lanka-Thailand Free Trade Agreement, which encompasses aspects such as trade in goods, investment, customs procedures, and intellectual property rights, was endorsed in the presence of Sri Lankan President Ranil Wickremesinghe and Thai Prime Minister Srettha Thavisin. Negotiations for this trade pact began in 2016, reflecting a long-standing interest in bolstering bilateral trade relationships.
In 2022, trade between the two nations was valued at approximately $352 million, with Thailand’s exports to Sri Lanka totaling $292 million and Sri Lanka’s exports to Thailand at $58 million. The sectors covered include precious stones, apparel, tea, spices from Sri Lanka, and smoked rubber sheets, natural rubber, plastic, and cement from Thailand. The Sri Lankan government anticipates that this agreement will elevate bilateral trade to $1.5 billion. Prime Minister Thavisin highlighted the agreement’s potential to enhance investment in key sectors like fisheries, food processing, tourism, and green energy, noting Thailand’s $92 million direct investment in Sri Lanka from 2005 to 2022.
Additionally, he announced the resumption of daily flights by Thai Airways from Bangkok to Sri Lanka, aimed at boosting tourism. Sri Lanka’s economic struggles have been significant, with a declaration of bankruptcy in April 2022 amidst a debt exceeding $83 billion, a substantial portion of which is owed to foreign creditors. The ensuing economic crisis prompted widespread protests and the eventual resignation of then-President Gotabaya Rajapaksa. Although severe shortages have been mitigated, there’s growing public discontent regarding measures such as increased electricity bills and new income taxes.
The International Monetary Fund has extended a four-year bailout program to assist Sri Lanka, which is also in the process of restructuring $17 billion of its external debt, having reached agreements with several creditors. President Wickremesinghe described the trade agreement as a crucial step in Sri Lanka’s economic partnership with Thailand, emphasizing the progress in economic stabilization and the importance of Thailand’s support as Sri Lanka aims for economic transformation and closer integration within Asia. He noted that this agreement marks Sri Lanka’s second with an ASEAN country, following a similar pact with Singapore, and mentioned ongoing trade discussions with India and China.
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