Sri Lanka signs $400mn currency swap facility with RBI; Read More-

New Delhi, July 25: To boost the foreign reserves and to ensure the financial stability amid the COVID-19, Sri Lanka signed a USD 400 million currency swap agreement with Reserve Bank of India (RBI) valid till November 2022.

 

 

 

This agreement will assist to meet short-term international liquidity requirements following the economic crisis resulted from COVID-19. The swap arrangement is a decision two countries reach while doing the trade-related payment.

 

 

The Cabinet has approved a proposal made by Prime Minister Ma Mahinda Rajapaksa as the finance minister to agree with the RBI. The Indian delegation comprised of senior officials from the Ministry of External Affairs, the Ministry of Finance, and the EXIM Bank which interacted with representatives from the Department of External Resources of Sri Lanka through a video conference.

 

The High Commission of India in Colombo, Sri Lanka said an agreement had been reached after the debt repayment rescheduling discussions held on Wednesday. It said that the development comes as a relief for Sri Lanka which can help it in the post COVID recovery. The High Commission added that it is another example of India's strong commitment to work with Sri Lanka in post-COVID-19 economic recovery.

 

Both the countries had earlier discussed the ongoing COVID-19 pandemic when Prime Minister Narendra Modi's held telephone conversations with Sri Lankan President Gotabaya Rajapaksa on May 23 and Prime Minister Mahinda Rajapaksa on May 27 about the ecomonic and social impacts in the region. During these conversations, PM Modi had assured that India would continue to provide all possible support to Sri Lanka for mitigating the effects of the pandemic.

 

During the courtesy call on President Gotabaya by Indian High Commissioner Gopal Baglay on May 29, it was agreed to accelerate India's participation in Sri Lanka's post-COVID economic recovery. Due to the telephonic conversations, the High Commission of India engaged with the Government of Sri Lanka to facilitate the initiation of discussions between the two sides on this matter.

 

The next round of technical discussions between the two sides on the rescheduling of debt repayment is expected to be held soon.

 

A currency swap is a transaction in which two parties exchange principal and interest in different currencies. Companies doing business abroad often use currency swaps to get more favorable loan rates in the local currency than if they borrowed money from a local bank.