Sri Lanka Reverts To $400 Million Foreign Currency Swap With Reserve Bank Of India (RBI)

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

Sri Lanka on Friday said that its Central Bank will return to a $ 400 million foreign currency swap with the Reserve Bank of India as part of measures to boost the country’s foreign reserves hit by the COVID-19 pandemic. Central Bank Governor W D Lakshman said the country can 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 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. Lakshman said 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 had 4.4 billion US dollars of reserves in April 2021. COVID-19 struck Sri Lanka in March 2020, putting its foreign reserves under strain since, as tourism, worker remittances and exports were badly hit.

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.