ECONOMYNEXT – Sri Lanka has requested a 400 million dollar swap line from the Reserve Bank of India under an arrangement available for South Asia while another request for a billion US dollars may be made at head of state level, an official said as the country fought off a Coronavirus crisis.
“Due to the current period here is capital flight in all countries,” Deputy Governor of Sri Lanka’s central bank Nandalal Weerasinghe said in an interview with Sri Lanka’s Derana TV.
“In times like these there are facilities that central banks give to others on the short term to help repay foreign debt.
“At the Reserve Bank of India there is a facility for each SAARC country (South Asia Association for Regional Co-operation) for 400 million dollars. We have requested it.”
Sri Lanka in 2015/2016 also received another billion dollars following a request at head of state level from India, which was also being considered, he said.
A swap line request with the People’s Bank of China is also being considered, he said.
Sri Lanka has about 7.5 billion US dollars in forex reserves, but the country is seeking more funds to repay debt, Weerasinghe said.
Sri Lanka’s central bank has made large liquidity injections from February 2020 and the rupee had fallen from 182 to 200 to the US dollar.
In March real money demand had risen amid Coronavirus crisis, but the central bank, which runs a soft-pegged monetary has over-issued cash and there is over 100 billion dollars in excess cash in money markets.
The central bank has tightened exchange controls and import controls as the rupee came under pressure and politicians have warned of more controls and asked people to grow vegetables.
The central bank has appealed for dollar inflows.
The Colombo stock market is also closed. (Colombo/Apr09/2020)