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Swap with China is a plaster solution: Harsha

12 Mar 2021

  • Mangala questions currency composition of swap in tweet

By Zahida Rizvi   As Sri Lanka has chosen a $ 1.54 billion currency swap with China, former State Minister of National Policies and Economic Affairs Dr. Harsha de Silva stated that the swap is a “plaster solution” that has been put forth by the current Government. Speaking to The Morning Business, he emphasised that the Sri Lankan Government will eventually go to the International Monetary Fund (IMF) regardless of their recent swap with China. “The Government needs to map out a medium to long-term debt restructuring plan to obtain sustainable confidence in the international market,” he added. China approved the said swap with Sri Lanka on Wednesday (10). Additionally, Dr. de Silva pointed out that if the Government had obtained $ 1.54 billion, it would be obliged to repay some of the debt within this year. Meanwhile, former Minister of Finance Mangala Samaraweera in a tweet yesterday (11) questioned the currency composition and the time period of the swap. “Instead of working out a credible economic recovery programme with IMF, Sri Lanka buys time from the looming economic apocalypse with a $ 1 b currency swap with China,” Samaraweera tweeted. However, State Minister of Capital Markets, Money, and State Enterprise Reforms Ajith Nivard Cabraal has been vehemently opposing accessing the IMF to resolve the country’s debt obligations. “We built up reserves in every country and we invest those reserves in various western countries. Thus, we are able to derive an income of 1.5%. When we borrow, we borrow at 6% or 7%. Every time we build up reserves, we lose more. This is because the IMF dictates as well as general ratings agencies requests,” Cabraal said during a recent press conference. All our attempts to reach Central Bank Governor Prof. W.D. Lakshman and Cabraal for further information on the swap yesterday proved futile. According to Bloomberg NewsWire data, the yield on Sri Lanka’s 6.25% coupon 2021 bond fell to around 18% from 28%, after the announcement of the $ 1.5 billion swap attained amongst Sri Lanka and China.


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