‘SL making no attempt to put Chinese swap to use despite meeting pre-condition’

By Sanath Nanayakkare

Sri Lanka is not making any attempts as yet to put its currency swap worth USD 1.4 billion with China to ‘usable’ form, even though the country has now met the pre-condition that qualifies it to do so, CBSL Governor Dr. Nandalal Weerasinghe revealed yesterday.

CBSL and People’s Bank of China entered into a currency swap agreement for Chinese Yuan 10 billion (USD 1.4 billion) in March 2021, valid for three years, with a view to promoting bilateral trade and direct investment for economic development.

However, as per conditions imposed by China to which Sri Lanka had agreed, the latter cannot use the funds, but was only allowed to use it when the CBSL officially declares its foreign reserve levels.

In August 2022, Ranil Wickremesinghe as the country’s new President, after the exit of former president Gotabaya Rajapakse, told parliament that Sri Lanka was required to have enough foreign reserves to cover three months of imports to be able to utilize this Chinese swap.

“We have a Chinese swap which we can’t use and I can’t fathom on what basis the Sri Lankan authorities have negotiated the transaction, he said at the time.

By January 2024, according to CBSL data, Sri Lanka has USD 3 billion worth foreign reserves, which is adequate to cover three months’ imports as per the condition imposed by the Chinese swap agreement, in addition to other positive economic indicators, including the improved balance of trade and balance of payments (BOT and BOP), but Sri Lanka has not approached the People’s Bank of China to try and use the facility and further strengthen its foreign reserves level.

When this query was posed by the media yesterday, Dr. Nandalal Weerasinghe briefly said that the government hasn’t started any negotiations yet for the conversion of the Chinese swap.