• SL’s total debt to RBI stands at $ 2.6 b; $ 2.2 b dollar swap and $ 400 m SAARC agreement
• India proactively informs Lankan Govt. of extension due this week to prevent default
• Period of extension to be cited in official communication of extension due from New Delhi
• Diplomatic channels worked to ensure extension without Lankan Govt. having to engage with New Delhi

The Indian Government last week intervened to prevent the Sri Lankan Government from defaulting on a payment of over $ 1 billion due this coming week under a swap agreement by granting an extension, The Sunday Morning learns.

A sum of over $ 1.7 billion is due and pending this coming week. 

This pending amount is a Special Swap Arrangement under the Asian Clearing Union (ACU) and South Asian Association for Regional Cooperation (SAARC) mechanism of approximately $ 2.6 billion.

However, it is learnt that after taking into account the nascent economic recovery and the upcoming discussions the new Government of Sri Lanka is initiating with the International Monetary Fund (IMF), India has proactively extended the swap arrangement to support Sri Lanka’s economic stabilisation process.

A highly-placed source told The Sunday Morning that the swap had been extended by India even without the Sri Lankan Government having to engage with the Indian Government and had been done at a diplomatic level.

The source further noted that the Indian side had unofficially communicated the decision to roll over the pending payment to the Sri Lankan Government and that the official communication on the matter would be sent in due course.

When asked until when the extension had been granted to Sri Lanka for payment, the source noted that it would be known in the official communication that was due from New Delhi.

According to the IMF staff report, Sri Lanka’s arrears to the Reserve Bank of India (RBI) under the ACU and penalty interest have been converted into a $ 2.2 billion swap.

The ACU arrears have been combined with another $ 400 million swap given by the RBI to Sri Lanka under a SAARC agreement.

The total $ 2.6 billion is to be settled between the period of 2023-2026.

In the week leading up to the Presidential Election last month, Sri Lanka had reportedly repaid $ 400 million to India, along with an additional $ 200 million towards the debt owed to the ACU.