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Lanka ‘banking on’ $1 bn India swap deal

Aid “crucial” to help Colombo meet its debt obligations: central bank employee

Sri Lanka is “banking” a $ 1 billion foreign exchange swap from India to meet its debt repayment obligations this year and emerge from the current economic crisis, a senior Sri Lankan central bank official said.

The island nation has already serviced part of its debt this year and is preparing to pay off the remaining more than $ 3 billion over the next six months, officials said. With the maturity of an international government bond, the maturity of 1 billion dollars is due in July.

“We expect a $ 400 million swap from the Reserve Bank of India in a few months through the SAARC instrument,” said the official, who spoke on condition of anonymity given the sensitivity of the ongoing bilateral talks. “But the extra $ 1 billion will be crucial for us,” the official added.

In May 2020, Sri Lankan President Gotabaya Rajapaksa asked Prime Minister Narendra Modi for a “special” $ 1.1 billion currency swap to help the country increase its foreign reserves.

“More than a year has passed … this is a decision that has to be made by the political leadership in India, it is outside the RBI,” said the central banker of Sri Lanka.

While official sources in New Delhi have previously indicated that negotiations on the issue are “ongoing”, the Indian government has not yet responded to both President Rajapaksa’s request and Prime Minister Mahinda Rajapaksa’s request to freeze the debt, even as bilateral negotiations have continued at high levels.

On June 21, Sri Lankan Foreign Minister Dinesh Gunavardena had a telephone conversation with his counterpart S. Jaishankar, during which they agreed to co-operate on “common issues in the region”, according to a statement from the Sri Lankan Ministry of Foreign Affairs. . The communication does not mention Colombo’s forthcoming requests for economic aid.

Meanwhile, the governor of Sri Lanka’s central bank said in a statement Tuesday that the country is focused on managing its debt service obligations this year. Sri Lanka’s gross official reserves are currently $ 4 billion, with the exception of a $ 1.5 billion “reserve” swap deal with the People’s Bank of China.

Regarding the influx expected this year, Governor WD Lakshman said a $ 250 million swap from the Bank of Bangladesh is expected in July and a $ 400 billion SAARC from RBI is expected in August. with the bank’s Indian counterpart, in addition to about $ 800 million expected in August, according to the IMF’s distribution of Special Drawing Rights.

Sri Lanka’s total foreign debt was $ 32.2 billion as of March 2021. The country will meet all its external debt service obligations on time, maintaining the “impeccable record of the country,” Mr Lakshman said in a statement.

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