Debt-stricken Sri Lanka & New Zealand discuss ways to deepen bilateral trade and investment ties

COLOMBO, Sri Lanka (AP) - Debt-stricken Sri Lanka hosted one of New Zealand’s top ministers to discuss ways to deepen bilateral ties in areas such as trade, tourism and agriculture.

Winston Peters, New Zealand's deputy prime minister and foreign affairs minister, met Sri Lanka Foreign Affairs Minister Vijitha Herath in the capital Colombo on Monday. The five-day visit by Peters is scheduled to continue until Wednesday

The visit comes as Sri Lanka struggles to emerge from its worst economic crisis, which began in the Indian Ocean island nation three years ago.

The countries have improved relations in recent years, establishing a New Zealand embassy in Colombo in 2021 and a Sri Lankan embassy in Wellington this year.

The discussion Monday focused on advancing ties in trade, investment, agriculture, education and tourism, Herath said.

"We also explored expanding trade links in high-potential sectors such as diary, processed food, fresh produce and discussed improving market access for Sri Lankan products," Herath told reporters.

He commended New Zealand's support in developing Sri Lanka's dairy industry, saying it had a "transformational impact on rural livelihood."

Sri Lanka has embarked on an effort to expand and modernize its domestic diary industry in recent years, but still produces only about 40% of the country’s demand for milk and dairy products, while the balance is imported.

New Zealand is a key supplier of those dairy products, especially milk powder. In 2024, New Zealand exported $335 million in goods to Sri Lanka, with dairy products forming the bulk.

Trade balance between the nations favors New Zealand, which in 2024 imported goods worth $64 million from Sri Lanka including tea, coffee, apparel and rubber products.

The discussion included reducing red tape at the border and how to "increase Sri Lanka's market access capabilities,” Peters said.

“We discussed the growing number of New Zealand companies working with and investing in Sri Lanka or looking to work with Sri Lankan partners," said Peters, adding that those collaborations will benefit Sri Lanka's tourism, agriculture and healthcare sectors.

Sri Lanka declared bankruptcy in April 2022 with more than $83 billion in debt, more than half to foreign creditors. It sought the help of the International Monetary Fund, which approved a $2.9 billion, four-year bailout package in 2023 under which Sri Lanka was required to restructure its debt.

In September last year, Sri Lanka said it had concluded the debt restructuring process after reaching agreements with bilateral and multilateral creditors and private bondholders. Sri Lanka is seeking to obtain $17 billion in debt service relief.

Sri Lanka's crisis was largely the result of economic mismanagement combined with fallout from the COVID-19 pandemic, along with 2019 terrorism attacks that devastated its important tourism industry. The pandemic also disrupted the flow of remittances from Sri Lankans working abroad.