Sri Lanka plans US$1bn currency swap with China: Prime Minister

ECONOMYNEXT – Sri Lanka is planning a one billion US dollar currency swap with China Central Bank, which will help ease foreign currency problems in the country, Prime Minister Ranil Wickremesinghe told parliament.

India has given a 700 million dollar swap until a deal with the International Monetary Fund is signed and has also given another 400 million dollars for three months through separate swap facility for South Asian countries.

In September 2014 the People Bank of China signed a swap deal with the Central Bank of Sri Lanka under which Sri Lanka could draw down 10 billion Yuan (about 1.5 billion US dollars) in exchange for 225 billion rupees.

The deal was valid for three years and can be extended by ‘mutual consent’ the PBC said.

Central Bank swaps however do not help solve balance of payments crises, which are related to excessive domestic credit, which is accommodated by central bank credit (printed money).