Reducing Dependency On US Dollar? After Japan And UAE, Now Sri Lanka To Go For $400 Million Currency Swap With India

Reducing Dependency On US Dollar? After Japan And UAE, Now Sri Lanka To Go For $400 Million Currency Swap With IndiaPM Modi (right) with Mahinda Rajapaksa (left) (Yasbant Negi/India Today Group/Getty Images)

The Reserve Bank of India (RBI) has assented to a $400 million currency transfer with Sri Lanka under SAARC’s SWAP facility, reports The New Indian Express. Sri Lanka’s economy is reportedly suffering from poor investor sentiment and large currency outflows.

“The RBI's very rapid and timely assistance will serve to boost investor confidence by supporting Sri Lanka to maintain adequate level of external reserves while accommodating outflow related to imports, debt servicing and if necessary support for the currency to avoid disorderly adjustment,” said a statement released by Sri Lanka’s Central Bank.

Sri Lankan economy took a hit following a political and constitutional deadlock in the preceding months when Ranil Wickremesinghe was removed from the Prime Minister’s position and replaced by veteran politician Mahinda Rajapaksa.

The Sri Lankan rupee depreciated by around 19 per cent in 2018 against the US dollar, making it one of Asia’s worst performers. On last Thursday (3 January) the Sri Lankan Rupee hit a lifetime low of 183 against the greenback.

Data from the Central Bank revealed that foreign investors had withdrawn a net sum of 22.8 billion rupees from the country’s equity markets while pulling out another 159.8 billion rupees from government securities.

The Central Bank also announced that Finance Minister Mangala Samaraweera would be continuing talks for financial assistance from the International Monetary Fund (IMF) in Washington next week.