• Exporters’ liquidity woes, bureaucratic delays sour appetite for State-managed swaps
• Russian aircraft dues proposal falters as exporters cite existing payment channels
• Future barter only out of absolute necessity and after consulting exporters: SLTB

Sri Lanka is highly unlikely to enter into any new barter trade arrangements in the foreseeable future, the Sri Lanka Tea Board (SLTB) has said, as the country’s only State-level barter deal, the tea-for-oil agreement with Iran, draws to a close.

“It is highly unlikely that Sri Lanka will pursue new barter trade arrangements in the foreseeable future. Should the need arise, any such opportunities would have to be explored in consultation with the export community,” Sri Lanka Tea Board Director – Promotion Sudharma Karunarathna told The Sunday Morning Business. 

According to Karunarathna, approximately $ 235 million worth of Ceylon Tea has been exported to Iran under the scheme to date, with the remaining balance of $ 15 million set aside for final reconciliation.

The agreement, signed in December 2021, was designed to settle an outstanding legacy debt of approximately $ 250.9 million owed by the Ceylon Petroleum Corporation (CPC) to Iran.

While the mechanism succeeded in bypassing international banking restrictions and preventing a formal default, Karunarathna noted that its practical execution had encountered considerable resistance from the private sector.

Under the arrangement, the CPC reimbursed the SLTB in local rupees in capped monthly tranches of $ 5 million, placing the payment burden on State entities. This led to administrative delays, bureaucratic bottlenecks, and prolonged waiting times for exporters seeking to recover their working capital.

Karunarathna also revealed that a proposal had been explored to settle outstanding liabilities for Russian aircraft overhaul services through tea exports, as a means of circumventing US and Western sanctions. However, the tea export community had shown reluctance towards the arrangement. 

He explained that Sri Lankan tea exporters already maintained functional commercial settlement channels with Russian buyers, largely routed through non-sanctioned financial institutions or secondary trade hubs, eliminating any commercial incentive to exchange open market sales for a complex, State-managed barter scheme.

“Given the substantial bureaucratic drag of bilateral clearing and the private sector’s clear reluctance to absorb liquidity bottlenecks, Sri Lanka is unlikely to adopt barter models with other trading partners in the tea sector unless absolutely necessary,” he said.

The Tea Board’s position signals a clear preference for conventional, market-based trade settlement over government-to-government swap mechanisms, which, despite offering a diplomatic and financial workaround in times of crisis, have proven costly for exporters in terms of cash flow and turnaround time.

Tea earnings top $ 1 b, but dollar income slips

Sri Lanka’s tea export earnings reached approximately $ 1.083 billion in the January–September 2026 period, down from $ 1.163 billion a year earlier, according to Customs data analysed by Siyaka Research.

Export volumes for the nine months fell 4% to 189.4 million kg from 198.3 million kg. However, rupee earnings rose to Rs. 350 billion from Rs. 347 billion, largely owing to the depreciation of the rupee against the dollar.

Value-added tea, led by packets, teabags, and instant tea, continued to account for around 58% of total exports.

Amid ongoing turmoil in the Middle East, shipments to and through Turkey surged 134% to 35.7 million kg, while Iraq, traditionally a key buyer, fell sharply to 18.4 million kg from 30 million kg. Libya also dropped to 6.6 million kg from 15.9 million kg, reflecting a shift towards alternative routes. Russia held steady at 16.9 million kg, while Azerbaijan rose 34% and Jordan 51%.

Chile, which hit a five-year import high last year, slipped to 6.3 million kg from 8.5 million kg.