Sri Lanka secures US $ 400mn from RBI to support dwindling reserves

The Reserve Bank of India (RBI) has agreed to provide US $ 400 million to the Central Bank under its SAARC swap facility.

Sri Lanka has also requested a further bilateral swap arrangement of US $ 1 billion between the RBI and Central Bank, which is under consideration.

The Central Bank expects the swap arrangement would boost foreign reserves and investor confidence.

Sri Lanka’s external reserves fell to US $ 6.94 billion at the end of 2018.

The political turmoil triggered on October 26, 2018 saw the three major international rating agencies downgrading Sri Lanka’s credit rating and the International Monetary Fund (IMF) suspending the US $ 1.5 billion Extended Fund Facility (EFF) programme.  

“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,” the Central Bank said.

The Central Bank also said plans are underway to raise the necessary funds for debt repayments within the first quarter of this year.

With the end of the political stalemate, the Central Bank and government have revived the attempts to issue international sovereign bonds, obtain term loans and negotiate credit lines through state banks on behalf of the government. 

According to the Central Bank, Sri Lanka has to raise around US $ 3 billion for foreign debt repayments this year, as the country has around US $ 5.9 billion worth of debt repayments due in 2019, including the dollar-denominated domestic debt.

Meanwhile, the Central Bank revealed that Finance and Mass Media Minister Mangala Samaraweera is scheduled hold talks with the IMF (January 14 – 16, 2019) to resume EFF negotiations.