CB says swap facility from China could be two weeks away while India’s in progress

• Fresh US $ 1.5bn currency swap with People’s Bank of China
• US$ 300mn swap facility with Reserve Bank of India

A US$ 1.5 billion fresh currency swap arrangement that is being worked out with the People’s Bank of China (PBC) could be just two weeks away from finalising, while another swap with India for US$ 300 million is awaiting India’s Finance Ministry nod, a top Central Bank official said. 

According to Central Bank Deputy Governor, N.W.G.R.D Nanayakkara, the negotiations with the PBC, China’s Central Bank, have reached the final stages and a definite decision would be available in about two weeks or so. 
This is besides the US$ 700 million second tranche of the US$ 1.2 billion foreign currency term financing facility from China Development Bank (CDB). 

Sri Lanka took the receipt of the first tranche of US$ 500 million in March 2020, granted at a rate of LIBOR plus 2.51 percent with an upfront fee of 1.25 percent. The loan has a three-year grace period and 10-year total payment tenor since the date of signing. 

Sri Lanka’s rupee came under intense pressure since late December due to certain deferred import related payments coming into the market, but the authorities are confident that the current volatility is temporary. 

Sri Lankan rupee was quoted at 190.89/196.05 at the open market yesterday, tad weaker from 191.6475/196.02 on Monday’s opening.

Meanwhile, the swap facility with the Reserve Bank of India (RBI), India’s Central Bank, has been progressing and the agreement is before the Finance Ministry of India. 

“To my knowledge they need to get some approvals from India’s Finance Ministry,” said the Deputy Governor K.M.M. Siriwardana, who is involved in the deal.

The facility, which could be in the range of US$ 300 million is the second in an year as Sri Lanka took US$ 400 million in July 2020 from RBI under the South Asian Association for Regional Cooperation framework to boost foreign reserves and ensure financial stability of the country hit by the pandemic. 

In May, Sri Lanka made a request for a special US$ 1.1 billion currency swap facility from India.