Sri Lanka approves currency swap proposal worth $400 mn with RBI amid pandemic

Sri Lanka is set to enter into an important agreement with the Reserve Bank of India (RBI) in order to boost its foreign reserves which have been hit hard due to the pandemic. A top Sri Lankan minister reportedly said that the cabinet has approved the proposal of currency swap worth $400 million to ensure financial stability amid COVID-19 pandemic.

Prime Minister Mahinda Rajapaksa, who also holds the portfolio of Finance Ministry, had proposed the cabinet to enter into an agreement with the RBI aimed at meeting short-term international liquidity requirements. Co-Cabinet spokesperson Information and Communication Minister Bandula Gunawardena said that the island nation will finalise the deal with India’s central bank for a Bilateral Currency Swap Arrangement.

Sri Lankan economy has been hit hard by the coronavirus and has decided to lift the nationwide curfew from April 27 even as the number of cases surges past 400. On April 24, the island nation reported its highest single-day spike in coronavirus cases with 49 infections in one day. The decision to lift the curfew could be perceived from the recent economic setbacks after which the Fitch Ratings, the American credit rating agency, downgraded the ratings from ‘B’ to ‘B-’. 

Read: Sri Lanka Reimposes Curfew After Coronavirus Cases Spike, Nationwide Toll At 420

'Ill-timed'

However, Sri Lankan Finance Ministry has lashed out the company for its “ill-founded and ill-timed” rating action and categorically expressed its disagreement with the assessment of risks. The ministry said in a statement on April 25 that their assessment shows “rush to judgement” and exposes “prejudicial nature” when the whole world is struggling against a public health crisis.

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The Sri Lankan government stressed that it has implemented a number of proactive measures from multiple spheres and have already helped contain the spread of the COVID-19 outbreak to a great extent. The ministry added that the government has already initiated measures to restore normalcy in several parts of the country and further easing of containment measures will enable domestic economic activity to pick up in the second half of 2020.

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(With PTI inputs)