ECONOMYNEXT – The Reserve Bank of India has provided Sri Lanka with a 500 million US dollar delay in cross-border settlements and a 400 million US dollar swap, the Indian High Commission in Colombo said.
“High Commissioner met governor of central bank of Sri Lanka and expressed India’s strong support to Sri Lanka in the wake of Reserve Bank of India (RBI) extending over USD 900 million facilities over the last week,” Indian High Commission in Sri Lanka said in a twitter.com message.
“These comprise deferment of Asian Clearing Union settlement of over USD 500 million and currency swap of USD 400 million.”
The Asian Clearing Union is a regional net settlement arrangement set up in 1974 when India, Sri Lanka and some other countries were printing money and had chronic forex shortages after the collapse of the Bretton Woods system of soft-pegs.
India, Iran, Nepal, Pakistan, Sri Lanka as well as Bangladesh and Myanmar are in the arrangement. Maldives and Bhutan which do not have activist central banks and do not usually have currency troubles joined the union in 1999 and 2009.
Sri Lanka usually has a negative balance on the Asian Clearing Union which forms part of gross reserves. India is a top import destination for Sri Lanka, allowing consumers to buy goods at prices lower than competitors, giving a ‘bigger bang for buck’.
Settlements are usually made quarterly.
Separately Central Bank Governor Nivard Cabraal said India’s High Commissioner in Colombo has confirmed support to Sri Lanka at a meeting.
“Had an excellent discussion with Indian High Commissioner to #SriLanka HE Gopal Baglay at my office this morning where he confirmed the #SAARC #SWAP by RBI and other forms of bilateral cooperation,” Cabraal said.
The statements come a day after Standard and Poor’s downgraded Sri Lanka by one notch to ‘CCC’ (Colombo/Jan13/2021)