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$ 1 b swap with Qatar to strengthen reserves

13 Dec 2021

BY Shenal Fernando Sri Lanka has entered into discussions with the Qatar Central Bank to obtain a foreign currency swap exceeding $ 1 billion as part of the Government’s plan to strengthen foreign currency reserves of the country, according to State Minister of Samurdhi, Household Economy, Microfinance, Self-Employment, and Business Development Asanka Shehan Semasinghe. This revelation was made by Semasinghe last Thursday (9) in Parliament, where he claimed that the Government had taken several steps to strengthen the reserve position of the country. Explaining further, he stated: “The Central Bank of Sri Lanka (CBSL) has commenced discussions with the Qatar Central Bank to obtain a swap of over $ 1 billion. Furthermore, under the South Asian Association of Regional Co-operation (SAARC) financial facilities, we have obtained a foreign currency swap of $ 400 million from the Indian Reserve Bank. In addition, we have also taken steps to obtain $ 300 million through combined loan schemes. “The Government is also hoping to receive $ 500 million through the securitisation of foreign worker remittances. Additionally, the Finance Minister has obtained from his Indian visit a $ 500 million credit line for fuel purchasing and a $ 1 billion credit line for essential goods and medicine purchases. Financial institutions such as Asian Development Bank (ADB) and the World Bank have also indicated that they will support us.” These statements were made by Semasinghe on the back of increased public concern over the foreign reserve position of the country. Currently, Sri Lanka’s official foreign reserves have fallen to $ 1.6 billion by end-November, down 30% from October. From the remaining reserves, liquid foreign currency reserves amount only to $ 1 billion, which is sufficient to cover only around three weeks of imports, according to Central Bank data. This situation is further exacerbated by the fact that Sri Lanka’s pre-determined outflows over the next two months for the repayment of short-term funds, foreign currency-denominated loans, and their interest payments exceed $ 1.4 billion. As per CBSL data, the total government debt stands at Rs. 16.6 trillion, of which Rs. 6.6 trillion is foreign currency-denominated debt – this represents 40% of the total debt. Furthermore, as revealed by Samagi Jana Balawegaya (SJB) MP and senior economist Dr. Harsha de Silva in Parliament last week, Sri Lanka will have to pay $ 4.8 billion over the period of February-October 2022 for foreign debt servicing.


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