Sri Lanka settles swap facility with Reserve Bank of India | Daily News

Sri Lanka settles swap facility with Reserve Bank of India

Sri Lanka has settled its currency swap facility with the Reserve Bank of India as scheduled, the Central Bank of Sri Lanka (CBSL) announced yesterday.

“The CBSL settled its Swap facility with the Reserve Bank of India as scheduled. There was no special request from India for a premature settlement as erroneously reported by certain media outlets. Discussions on future collaborations continue,” the Central Bank tweeted in its Twitter handle.

The Central Bank and the Reserve Bank of India (RBI) entered into a currency swap agreement on July 24, 2020 under the Framework on Currency Swap Arrangement for South Asian Association for Regional Cooperation (SAARC) countries for 2019 - 2022.

It was to provide short-term financing to the CBSL to meet the country’s balance of payment requirements.

The intention of the CBSL in entering into this Swap agreement was to be able to maintain sufficient short-term foreign exchange liquidity while preserving the foreign currency reserve position of the country intact.

The challenging external economic environment of Sri Lanka was the result largely of the Covid-19 pandemic.

This Swap agreement had the approval of the Cabinet of Ministers, received on the recommendation of the Monetary Board of the Central Bank.

Under the Swap agreement, US$ 400 million was received by Sri Lanka initially for a period of three months and was rolled over twice each with a three months tenor, subject to agreement on terms and conditions of the existing SAARC Framework.

The SAARC currency swap facility came into operation on November 15, 2012. Under the Facility, the Reserve Bank of India (RBI) offers swaps of varying sizes in US Dollars, Euro or Indian Rupee to each SAARC member country.

Last year Sri Lanka had also requested an additional US$ 1 billion, under a Special Bilateral Swap Agreement with the Reserve Bank of India.