India extends USD 900 mn facilities as Sri Lanka struggles to repay loans

As Sri Lanka is struggling to repay a US$ 500 million international sovereign bond (ISB) by the 18 January deadline whilst running short of reserves to purchase essential needs of the country, the Reserve Bank of India (RBI) will extend over US$ 900 million facilities to Sri Lanka, comprising Asian Clearing Union (ACU) settlement of over USD 500 million and currency Swap of USD 400 million.

Indian High Commissioner to Sri Lanka Gopal Baglay yesterday communicated this message to Sri Lanka’s Central Bank Governor Ajith Nivard Cabraal when the duo met at the latter’s office, according to the official Twitter handle of the CBSL Governor.

The Indian High Commissioner noted during the meeting that the steps were in line with India’s strong commitment to standing with Sri Lanka for its economic recovery and growth.

Governor of the Central Bank Ajith Nivard Cabraal tweeted yesterday that he had had a fruitful discussion with the Indian High Commissioner where he had confirmed a SAARC Swap by the Reserve Bank of India (RBI) and other forms of bilateral cooperation.

“Sri Lanka is at a decisive moment in raising overseas funds without going to the IMF so this signifies a positive development in mobilising funds from Sri Lanka’s friendly countries to tide over its current reserves crisis,” an analyst told The Island.

On 11 January, Vice President of ADB Shixin Chen met with the CBSL Governor where they had discussed ADB’s future programme in Sri Lanka, their Country Assistance Strategy and the upcoming ADB AGM to be held in Colombo in May 2022.

Asian Clearing Union (ACU) is a payment arrangement whereby the participants settle payments for intra-regional transactions among the participating central banks. A Swap is a contract through which two parties exchange the cash flows from two different financial instruments.