Sri Lanka seeks $1.1B currency swap facility from India as pandemic batters forex kitty

Amid financial crunch due to Coronavirus pandemic and subsequent disruption to global commerce, Sri Lanka has sought a special USD 1.1 billion currency swap facility from India to boost country's draining foreign exchange reserves. President Gotabaya Rajapaksa's office said new request is in dition to USD 400 million amount Sri Lanka has sought from Indian government under South Asian Association for Regional Cooperation (SAARC) framework.

Rajapaksa me request over a phone call with Prime Minister Narendra Modi on Saturday, which President's office described as “very constructive and cordial."

“If Government of India could provide $ 1.1 billion special SWAP facility to top up $ 400 million under SAARC Facility, it would ermously help Sri Lanka in dealing with our foreign exchange issues," statement from Rajapaksa’s office quoting president said.

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What is a currency swap?

A currency swap is an agreement in which two parties exchange principal amount of a loan and interest in one currency for principal and interest in ar currency. At inception of  swap, equivalent principal amounts are exchanged at spot rate. This is used by countries to defend against financial turmoil by allowing country beset by a liquidity crisis to borrow money from ors with its own currency.

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Ecomy in turmoil

COVID-19 pandemic has hit Sri Lankan ecomy hard as revenues from tourism — a major foreign currency earner — has dried up completely as countries across globe imposed strict travel restrictions. country is also facing crunch due to a slump in exports of cash crops and has arduous task of servicing its massive debt owed to China, which has over years employed predatory tactics to trap smaller countries in loans and n seize solid assets.

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COVID cases in SL

COVID-19 disease has claimed nine lives and infected 1,068 people in Sri Lanka so far, one of lowest rates in South Asia and just a tiny fraction of India. India has alrey sent four consignments of essential life-saving medicines and medical supplies weighing over 25 tonnes to Sri Lanka in last few weeks as a goodwill gesture. 

(AP Photo)

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