UPSC Articles
The Central Bank of Sri Lanka (CBSL) settled a $400 million currency swap facility from the RBI
Part of: GS Prelims and GS- II – International relations & GS – III – Economy
In news
- The Central Bank of Sri Lanka (CBSL) settled a $400 million currency swap facility from the RBI.
- The two countries had agreed upon meeting the terms.
Key takeaways
- 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.
- A further extension would require Sri Lanka to have a successfully negotiated staff-level agreement for an IMF programme, which Sri Lanka does not have at present.
Important value additions
- Currency swap agreements involve trade in local currencies, where countries pay for imports and exports at pre-determined rates of exchange without the involvement of a third country currency like the US dollar.
- It reduces the risk of volatility against the third currency and does away with the charges involved in multiple currency exchanges.
