Sri Lanka seeks $400 million currency swap arrangement with India's RBI

Sri Lanka, which is badly hit by the COVID-19 pandemic, is set to enter into an agreement with the Reserve Bank of India for a currency swap worth $400 million.

The arrangement is to boost the foreign reserves and ensure the financial stability of the island nation.

Sri Lanka's finance minister will sign the agreement with the RBI for the financing facility to meet short-term international liquidity requirements, minister Bandula Gunawardena said. The cabinet has approved a proposal made by prime minister Mahinda Rajapaksa in this regard.

The swap arrangement is a decision two countries reach while doing trade related payment.  Sri Lanka has placed critical economic measures to save the resources hit badly by the COVID-19 pandemic which has infected 373 persons in the country and the death toll reached seven.

The cabinet meeting chaired by president Gotabaya Rajapaksa paid special attention to the control of the coronavirus pandemic, its success and the distribution of goods and relief to the people.

The country has already ordered imports restrictions to prevent non-essential imports. This is in view of theSri Lankan rupee falling to its historical low against the US dollar.

The rupee now hovers over 195 to the dollar gaining somewhat from being down to 200 mark.

The government has also announced talks with Asian Development Bank and China's Asian Infrastructure Investment Bank. A $300 million budgetary support is anticipated from the ADB, officials said.

Tourism is the third-largest earner of foreign exchange in Sri Lanka. The decline in tourist arrivals has hit the island nation's tourism industry in a big way.

Recently, World Bank said that Sri Lankan economy will contract by three per cent this year as against a 2.4 per cent estimated growth last year.