Sri Lanka announced on Friday that its central bank would revert to a $ 400 million currency swap with the Reserve Bank of India as part of measures to increase the country’s foreign exchange reserves hit by the COVID-19 pandemic. Central Bank Governor WD Lakshman said the country could draw on the $ 400 million foreign exchange swap with the RBI in August 2021.
Sri Lanka initially signed the swap agreement available to SAARC countries in 2020 and repaid it in February 2021 after renewing it once. On February 1, the Central Bank of Sri Lanka settled the RBI’s $ 400 million currency swap facility. Central Bank Governor Lakshman said the same swap could be obtained after August.
The Sri Lanka-RBI swap agreement fell under the facilities available to SAARC countries in 2020. A few weeks ago, Sri Lanka entered into a $ 200 million swap with Bangladesh’s central bank. Lakshman said the signing of the agreement for the exchange with Bangladesh will take place soon.
Sri Lanka is due to pay $ 1 billion in sovereign bonds in July 2020. Sri Lanka had $ 4.4 billion in reserves as of April 2021. COVID-19 hit Sri Lanka in March 2020, putting its reserves in is changing under pressure as, as a tourism, hardworking remittances and exports have been hit hard.
SAARC’s currency swap framework came into effect on November 15, 2012 to provide a line of funding support for short-term foreign currency liquidity needs or short-term balance of payments pressures until that longer-term agreements be made.
The facility is available to all SAARC member countries, subject to their signing bilateral swap agreements.