The Government of Sri Lanka signed an agreement for currency swap of $ 400 million, or about ₹ 3000 crores with the Indian Government. This has been done for the two South Asian countries to boost forex reserves of their respective countries. Co-Cabinet spokesman Information and Communication Minister Bandula Gunawardena has said that an MoU will be signed with regard to this between the two countries.
This was followed by discussions at various levels at the level of the Central Reserve Bank of the two countries and at the level of the Ministry of Foreign Affairs. Sri Lankan President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa held separate telephone consultations with Prime Minister Modi on the agreement.
In the swap arrangement, a country provides dollars to a foreign central bank, which, at the same time, provides the equivalent funds in its currency to the former, based on the market exchange rate at the time of the transaction. The parties agree to swap back these quantities of their two currencies at a specified date in the future, which could be the next day or even two years later, using the same exchange rate as in the first transaction. In this case, the agreement is for two years.
According to the Indian Embassy in Sri Lanka, the Reserve Bank of India is working on the documents required to provide $ 400 million to Sri Lanka. The Indian embassy said the agreement was signed following talks between the two sides on restructuring India’s debt. The agreement is said to be in effect until November 2022.