Sri Lanka to receive Chinese and Indian swap facilities soon

Sri Lanka will be receiving Chinese and Indian financial facilities soon under swap arrangements to boost the foreign reserves and ensure financial stability of the country, which is badly hit by COVID-19, top Central Bank officials said.

The People’s Bank of China is expected to finalise the US$ 1.5 billion swap facility within two weeks while the Indian Finance Ministry will approve the $1 billion swap arrangement soon, they confirmed.              

Earlier in July last year India granted a $400 million currency swap facility until November 2022.

“An additional request for a bilateral currency swap arrangement worth around $1 billion by the Sri Lankan side remains under discussion,” said the Indian Foreign Ministry in a statement.

Central Bank Deputy Governor K.M.K. Siriwardene revealed that negotiations with the Reserve Bank of India for this facility have also been progressing.

“This Indian Central Bank will have to get some approvals from India’s Finance Ministry and it is likely to finalise shortly,” he added.

Negotiations with the People’s Bank of China are now at the final stage and a definite decision could be expected in two weeks, Deputy Governor Dhammika Nanayakkara said.

“They have indicated that their internal discussions are almost over and we will be informed shortly,” he added.

A foreign currency swap is an agreement to exchange currency between two foreign parties.

The agreement consists of swapping principal and interest payments on a loan made in one currency for principal and interest payments of a loan of equal value in another currency.

One party borrows currency from a second party as it simultaneously lends another currency to that party, he disclosed. (BS)