India’s central bank, Reserve Bank of India (RBI) has agreed to provide $400 million to the Central Bank of Sri Lanka (CBSL) under its SAARC SWAP facility.
CBSL has also requested a further bilateral SWAP arrangement of one billion dollars between the RBI and CBSL which is under consideration.
“The RBI’s very rapid and timely assistance will serve to boost investor confidence by supporting Sri Lanka to maintain an adequate level of external reserves while accommodating outflows related to imports, debt servicing and, if necessary, support for the currency to avoid disorderly adjustment,” CBSL said in a release on Wednesday (9).
The CBSL acknowledged the very active role played by the Indian government, the Sri Lankan High Commission, in Delhi, and the Indian High Commission, in Colombo, in facilitating these arrangements.
With the end of the delays related to the political developments in the country, the Government of Sri Lanka (GoSL) and the CBSL have also already revived action to issue international sovereign bonds, obtain term loans, and negotiate credit lines through the State banks on behalf of the GoSL.
It is expected that these operations will be completed in the first quarter of 2019.
In addition, Mangala Samaraweera, Sri Lankan minister of finance and mass media will be visiting Washington next week to resume negotiations with the International Monetary Fund (IMF) on the extended fund facility.
In 2018 foreign investors had pulled out a net Rs 22.8bn out of stock, and Rs 159.8bn from government securities. Sri Lankan currency fell 19 per cent recorded its worst performance last year making the currency one of the worst performing currencies in the Asian market.
Following the recent the political turmoil in the island nation, the credit rating agencies including, Fitch Ratings, Standard & Poor’s (S&P) and Moody’s Investor Services downgraded Sri Lanka’s sovereign rating.