COLOMBO: The Sri Lankan central bank will be able to access a $400 million swap line from its Indian counterpart after months of negotiations, central bank chief Ajith Nivard Cabraal confirmed in a tweet on Thursday.
"Had an excellent discussion with Indian High Commissioner to #SriLanka HE Gopal Baglay at my office this morning where he confirmed the #SAARC #SWAP by RBI and other forms of bilateral cooperation," he said.
Sri Lanka, which is deep in debt, has been struggling to build its dwindling forex reserves to restore investor confidence and negotiating swap lines and credit lines with several friendly countries to boost its dollar kitty.
The Indian High Commission also said RBI had deferred settlement of over $500 million via the Asian Clearing Union last week. The nine-member Asian Clearing Union includes the RBI and Sri Lankan central banks and helps settle intra-regional transactions.
Crisis-hit Sri Lanka slams latest credit rating downgrade
The swap could be released by the RBI on Thursday, sources at the Indian High Commission in Colombo told Reuters.
Sri Lanka managed to boost its flagging reserves to $3.1 billion at the end of December with help from a $1.5 billion yuan currency swap. However, the country has to repay about $4.5 billion in 2022 starting with a $500 million international sovereign bond maturing on Jan. 18.
In addition to the swap, Sri Lanka is negotiating with India for a $500 million credit line to purchase fuel and a separate $1 billion credit line to fund the purchase of essential items including medical supplies.
On Wednesday, S&P Global Ratings cut Sri Lanka's sovereign credit rating deeper into "junk" territory, to 'CCC' from 'CCC+' with a negative outlook, citing rising repayment pressures and "uneven access" to financing.
Sri Lanka has pledged to meet all payments for 2022.
"While the said inflows will ease the pressure on the balance of payment in the short-term, investors may monitor developments in the next two to three weeks to see past the latest downgrade," said Lalinda Sugathadasa, research head at ICRA Lanka.