fbpx

The Central Bank of Sri Lanka (CBSL) settled a $400 million currency swap facility from the RBI

  • IASbaba
  • February 9, 2021
  • 0
UPSC Articles
Print Friendly, PDF & Email

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.

For a dedicated peer group, Motivation & Quick updates, Join our official telegram channel – https://t.me/IASbabaOfficialAccount

Search now.....