Sri Lanka has requested for an extension of the time of the US $ 400 million currency swap facility provided in March this year.

Minister of Finance Ravi Karunanayake recently said this request had been made in the face of impending global situation. The minister told Parliament over the weekend that Sri Lanka will have to manage its reserves wisely in the face of China’s plan to devalue its currency against the dollar while USA’s Federal Reserve planning to raise its interest rates. This he said in response to an oral question raised by Opposition MP Bandula Gunawardene in the House during the weekend.

The Minister however assured that Sri Lanka’s foreign reserves are safe and said that the government would do its utmost to see that the country’s foreign reserves are safe in the face of any global crisis.

Going by the English word ‘swap’, means exchanging of currencies and in this instance India and Sri Lanka is engaged in exchanging currencies. While India had provided Sri Lanka US dollars, Sri Lanka is to provide a similar amount of funds in Sri Lankan Rupees in lieu of this.

This is an Indian cooperation for a short-term growth of Sri Lanka’s dollar reserves. Sri Lanka has increased its foreign reserves while utilizing the US dollars obtained from India.

While Sri Lanka could utilize these US dollars obtained from India for imports from any country or fulfil its dollar requirements, there are no limitations that this should only be used for transactions with India.(Yohan Perera)