According to the Ministry of External Affairs (MEA), Sri Lanka has asked India for a new currency swap facility worth about $1 billion and a deferment of debt repayment, both of them are getting discussed at an official level.

Discussions about the strengthening of bilateral financial cooperation between India and Sri Lanka are going on. The entire range of bilateral matters and exchanged views on regional and international issues of common concern are getting reviewed. According to Amit Narang, Joint Secretary, Ministry of External Affairs, India has already provided a $400 million currency swap facility to the Central Bank of Sri Lanka to assist them with economic recovery and to tackle the COVID-19 related disruptions. A currency swap is an agreement in which two parties exchange the principal amount of a loan and interest in one currency for the principal and interest in another currency. Currency swaps are used by financial institutions to obtain foreign currency loans at a better interest rate than a company could obtain by borrowing directly in a foreign market or as a hedging transaction risk on foreign currency loans, which it has already taken out.

An additional request for a bilateral currency swap arrangement worth around $1 billion by the Sri Lankan side remains under discussion. Apart from that, the technical discussion regarding Sri Lanka’s request for debt deferment is going on, and both of the parties may reach a mutual understanding shortly.