Central Bank of Sri Lanka repays swap line facility with RBI

The Central Bank of Sri Lanka (CBSL) settled a $ 400 million currency swap facility from the Reserve Bank (RBI) of India last week, meeting the terms that the two countries had agreed upon.

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The update sparked speculation in local media that India may have “abruptly terminated” the agreement, following Colombo’s decision to pull out of a 2019 agreement to develop a Colombo Port terminal jointly with India and Japan.

However, both countries clarified that the developments were not linked.

The CBSL obtained the swap facility on July 31, 2020, for an initial period of three months, to cope with the severe economic impact of the pandemic. Subsequently, the RBI provided a three-month rollover at CBSL’s request, until February 1, 2021.

Further extension would require Sri Lanka having a successfully negotiated staff level agreement for an IMF programme, which Sri Lanka does not have at present.