COLOMBO: Sri Lanka will start talks on a free trade agreement with Malaysia as it seeks to improve trade ties to support its recovery from a financial crisis, the cabinet spokesperson said on Wednesday.
A severe dollar drought in 2022 sent Sri Lanka's inflation soaring to a high of 70%, its currency into freefall and caused the economy to contract by 7.3%.
To help buttress recovery, Sri Lanka entered negotiations with multiple countries on free trade deals, inking one with Thailand in February.
"We need to promote stronger trade to move out of this crisis and Malaysia has strong ties with Sri Lanka to assist in this process," said cabinet spokesperson Bandula Gunawardana.
He did not say when formal negotiations would begin.
Trade between Malaysia and Sri Lanka was worth $934 million dollars in 2023, according to official data.
Sri Lanka exports mainly gems, garments and fish to Malaysia and imports palm oil, petroleum products and fertiliser.
Indonesia and Sri Lanka aim to sign a preferential trade agreement next March. Colombo is also in talks with Bangladesh on a free trade agreement and has restarted talks to expand an existing agreement with India.
The South Asian island nation is projected to post 3% growth in 2024 after two years of contraction. (Reporting by Uditha Jayasinghe; Writing by Tanvi Mehta; Editing by Ros Russell)