Sri Lanka repays US$400mn India swap, extension requires IMF deal

ECONOMYNEXT – Sri Lanka has repaid a 400 million US dollar swap line from the Reserve Bank of India after six months, as an agreement with the International Monetary Fund was required for further extensions, an Indian High Commission spokesperson said.

Sri Lanka originally drew on the swap line on July 31 and it was extended for three months till February 01, at Sri Lanka’s request.

“Further extension would require Sri Lanka having a successfully negotiated staff level agreement for an IMF programme, which Sri Lanka does not have at present,” the spokesperson said.

“It is reiterated that India abides by all of its international and bilateral commitments in letter and spirit.”

The Reserve Bank of India said at the time that the SAARC Currency Swap Framework would “provide a backstop line of funding for short term foreign exchange liquidity requirements or short-term balance of payments stress till longer term arrangements are made.”

It could be drawn down in multiple tranches up to 2022.

The three month facility was due to be rolled over twice, subject to the conditions in the facility for SAARC countries that the Reserve Bank of India provides, Sri Lanka’s central bank said at the time.

Sri Lanka has also been seeking a billion US dollar additional swap from India.

The swap helped boost Sri Lanka’s reserves, which were falling amid money printing and downgrade of the island’s sovereign credit to CCC.

Sri Lanka’s forex reserves fell to US$5,549.30mn in Dec 2020, from 7,642.39 in Dec 2019 according to central bank data.

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Sri Lanka swap repayment comes as Sri Lanka also failed to deliver on an agreement to allow India to build a container terminal in Colombo amid protests. China already has a terminal in Colombo. Sri Lanka has offered another terminal to India and Japan. (Colombo/Feb05/2021)

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