CB repays $ 400 m India swap

The Indian High Commission yesterday clarified that Sri Lanka’s Central Bank had settled a $ 400 million swap from India as per an agreement in July 2020, dismissing reports that repayment had been demanded following the Government’s decision over the East Container Terminal (ECT). 

Following widely circulated reports of India demanding the repayment of a $ 400 million swap, the Indian High Commission clarified that the Reserve Bank of India (RBI) and the Central Bank of Sri Lanka (CBSL) had concluded a $ 400 million currency swap agreement on 24 July 2020 under the SAARC Currency Swap Framework.  This swap facility was drawn by CBSL on 31 July 2020 for an initial period of three months. A three-month rollover was provided at CBSL’s request till 1 February 2021. 

Further extension would require Sri Lanka having a successfully negotiated staff level agreement for an International Monetary Fund (IMF) program, which Sri Lanka does not have at present. Therefore, the CBSL settled the swap facility with RBI as scheduled and this was clarified by CBSL on 5 February 2021.

The Indian High Commission also reiterated that India abides by all of its international and bilateral commitments in letter and spirit. 

Sri Lanka obtained the $ 400 million swap last year to provide a buffer against pandemic impact to bolster reserves and assist in debt repayment. Subsequently, CBSL also began negotiations for a separate $ 1 billion swap, which is yet to be finalised. 

A similar swap agreement is also in the works with People’s Bank of China. The Government has steadfastly refused to appeal to the International Monetary Fund (IMF) for assistance but will require assistance to repay an estimated $ 4.3 billion debt in 2021 as raising funds from international capital markets is unlikely given the multiple ratings downgrades in 2020.