India offers rupee trade option to nations facing dollar crunch

India will offer its currency as an alternative for trade to countries that are facing a shortage of dollars in the wake of the sharpest tightening in monetary policy by the US Federal Reserve in decades.

Facilitating the rupee trade for countries facing currency risk will help “disaster proof them,” Commerce Secretary Sunil Barthwal said during an announcement on India’s foreign trade policy Friday in New Delhi.

Sri Lanka, Bangladesh and Egypt are facing dollar shortage and have shown interest to trade in the Indian currency, a government official later told reporters, declining to be identified citing rules.

A lack of dollars played a party in forcing Sri Lanka to default on its debt last year, while Bangladesh recently took a loan from the IMF to shore up its own reserves.

India has been attempting to internationalize the rupee to reduce dollar demand and insulate its economy from global shocks.

Officials have previously said that apart from Russia, countries in Africa and the Gulf region are also keen to trade in its local currency.

The central bank first unveiled plans for rupee settlement last year, a project that has received an “encouraging response from other countries,” Deputy Governor T. Rabi Shankar said in an address in October.