The Central Bank of Sri Lanka (CBSL) is in talks to secure  an additional USD 1 billion, under a Special Bilateral Swap Agreement with the Reserve Bank of India (RBI) , it was announced yesterday.

This is in addition to the USD 400 million Swap Agreement with RBI which was signed last week.

CBSL and RBI entered into a currency swap agreement on 24 July 2020 under the Framework on Currency Swap Arrangement for South Asian Association for Regional Cooperation (SAARC) countries for 2019 - 2022.

This would provide short-term financing to the CBSL to meet the country’s balance of payment requirements, CBSL said in a press release.

Under the Swap agreement, USD 400 million will be received by Sri Lanka, initially for a period of 3 months and will be rolled over twice each with a 3 months tenor, subject to agreement on terms and conditions of the existing SAARC Framework.

The intention of the CBSL in entering into this Swap agreement was to be able to maintain a sufficient short-term foreign exchange liquidity while preserving the foreign currency reserve position of the country intact.

The challenging external economic environment of Sri Lanka today is the result largely of this Covid-19 pandemic. This Swap agreement has the approval of the Cabinet of Ministers, received on the recommendation of the Monetary Board of the Central Bank of Sri Lanka.

Senior Deputy Governor of the Central Bank of Sri Lanka, Dr. P. Nandalal Weerasinghe signed the agreement on behalf of the Central Bank of Sri Lanka and  Ajay Kumar, Regional Director of the Reserve Bank of India signed it on behalf of the Reserve Bank of India.