Why is this neighboring country of India, sunk in huge debt, drinking tea with Iran? Know the reason

The Sri Lankan economy is facing a cash crunch. Since the economic crisis in 2022, Sri Lanka is facing many challenges, out of which the government is looking for various solutions. Sri Lanka has exported $20 million worth of tea to repay Iran's $251 million debt, according to an official Sri Lankan government statement. Tehran has also expressed satisfaction over the payment of a small portion of the debt from tea exports.

So far, $20 million worth of tea has been exported to Iran under the barter trade agreement, Sri Lankan Prime Minister Dinesh Gunawardena's office said in a statement after talks with Iranian Foreign Minister Hossein Amir-Abdollahian. An 'oil for tea' agreement was signed between the two countries in December 2021, but exports have been delayed due to the economic crisis. The then President Gotabaya Rajapaksa had to resign in July 2022 due to economic crisis, after which Dinesh Gunawardene took over the chair.

Iran is also facing US sanctions while Sri Lanka is in dire cash straits. A barter trade agreement would allow Iran to bypass sanctions and trade with other countries. Sri Lanka has a large shortage of foreign exchange reserves, Sri Lanka defaulted in April 2022 due to non-payment of its $46 billion foreign debt. Early last year, Ceylon received an IMF bailout of $2.9 billion.