India provides financing stop-gap before IMF program

 

Sri Lanka received a $700 million currency swap from India on March 10, through the Reserve Bank of India (RBI), two days after securing a $400 million swap under the RBI's South Asian Association for Regional Co-operation (SAARC) facility.

These arrangements, which replace the RBI swap line that expired the week before, will offset in the near term the balance of payments pressures posed by slowing capital inflows and more recently a dip in remittance inflows. Sri Lankan authorities are also negotiating a more medium-term financing arrangement with the International Monetary Fund (IMF).The swap lines and potential IMF financing demonstrate Sri Lanka's access to official funding during periods when global market financing is becoming more difficult.

However, recourse to such official funding also highlights the fact that Sri Lanka's foreign exchange earnings and reserves fall short of its external financing requirements. 


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