Sri Lanka likely to revert to US$ 400mn foreign currency swap with India

The Sri Lanka-RBI swap deal came under the facilities available to SAARC countries in 2020.

Central Bank of Sri Lanka (CBSL) would return to a $400 million foreign currency swap with the Reserve Bank of India (RBI) as part of Sri Lanka’s measures to boost the foreign reserves hit by the COVID-19 pandemic, New Delhi Television (NDTV) reported on Friday.

Accordingly, Central Bank Governor Professor W D Lakshman said the country could draw down on the USD 400 million foreign exchange swap with the RBI in August 2021.

Sri Lanka originally signed the swap deal available to SAARC countries in 2020 and repaid it in February 2021 after rolling it over once. On February 1, the Sri Lankan Central Bank settled the USD 400 million currency swap facility from the RBI. Central Bank Governor Lakshman said hence the same swap could be obtained after August.

The Sri Lanka-RBI swap deal came under the facilities available to SAARC countries in 2020. A few weeks back, Sri Lanka entered a 200 million dollar swap with the Bangladesh central bank. According to the Governor, the signing of the agreement for the Bangladesh swap would happen soon.

Sri Lanka has to pay a billion US dollar sovereign bond in July 2020. Sri Lanka reported just above 4.4 billion US dollars of reserves in May 2021. COVID-19 struck Sri Lanka in March 2020, putting its foreign reserves under strain as tourism, worker remittances and exports were badly hit since then.

The SAARC currency swap framework came into operation on November 15, 2012, to provide a backstop line of funding for short term foreign exchange liquidity requirements or short-term balance of payments stress till longer term arrangements are made.

The facility is available to all SAARC member countries, subject to their signing the bilateral swap agreements, NDTV said.