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Cash-strapped Sri Lanka partially pays off Iran oil debt with tea

Sri Lanka has exported tea worth US$20 million to Iran to partially repay its US$251 million oil debts

“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.

The tea-for-oil deal was agreed upon in December 2021, but exports were delayed by Colombo’s economic crisis that forced then-president Gotabaya Rajapaksa to step down in July 2022.

The barter deal allows sanctions-hit Iran to avoid having to use up scarce hard currency to pay for imports of popular tea.

It also allowed Sri Lanka to pay with tea, as the country was short of foreign currency.

Colombo defaulted on its $46 billion foreign debt in May 2022 but managed to secure a $2.9 billion bailout from the International Monetary Fund (IMF), early last year. 

In recent weeks, doubts have been cast over Sri Lanka's debt restructuring plans with private creditors stating that no "substantive engagements" have occurred and that there is a "lack of transparency" with government creditors.

Last year an investigation led by the Guardian into the working conditions on the test estates prompted large companies to investigate the conditions.

Tetley and Lipton among other major tea manufacturers investigated the working conditions on tea plantations in Sri Lanka following a Guardian investigation which revealed that workers were unable to pay for food and were living in unsanitary conditions.

The investigation also revealed that estate owners provided workers with no support during the island's economic crisis. Workers reported that supervisors denied them pay.

Tea pickers have stated that they have had to skip meals and send their children to work to compensate for their inadequate earnings. 

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