Home / News / India /  Sri Lanka requests India for currency swap arrangement of up to $1.1 billion

Sri Lanka has requested India for a currency swap arrangement to the tune of $1.1 billion to ease pressures related to foreign currency reserves — seen as a fallout of the covid-19 pandemic devastating the tourism industry in the island nation.

This new request of $1.1 billion is separate from another for $ 400 million being negotiated between the two countries under the South Asian Association for Regional Cooperation (SAARC) framework.

Sri Lankan President Gotabaya Rajapaksa put forth the request during a telephone conversation with Indian Prime Minister Narendra Modi on Saturday, a statement from Rajapaksa’s office said. The conversation was described as “very constructive and cordial."

“If the Government of India could provide $ 1.1 billion special SWAP facility to top up $ 400 million under SAARC Facility, it would enormously help Sri Lanka in dealing with our foreign exchange issues," the statement from Rajapaksa’s office quoting the president said.

Sri Lanka’s economy has been hit by the novel coronavirus crisis with tourism — a major foriegn currency earner — drying up completely with the embargos on travel. India has been negotiating a currency swap agreement with Sri Lanka for $ 400 million. There was no mention of the new request in a read out of the conversation put out by the Indian side on Saturday. It comes in the wake of India’s strategic rival China moving with a $ 500 million loan offer from it’s central bank at reduced interest rates.

China is already one of the biggest investors in various infrastructure projects in Sri Lanka. But there has been criticism, both locally and internationally, and growing concerns that China has lured Sri Lanka into a debt trap. So far India has sent consignments of medicines to Sri Lanka as donation— something Rajapaksa thanked Modi for in his conversation on Saturday.

The “President speaking from the Presidential Secretariat, appreciated the opportunity to discuss matters of mutual interest with the Indian Premier and thanked him for the support extended by India to help Sri Lanka face these difficult times. India’s gift of 10 tonnes of medical supplies proved to be very useful, said the President in appreciation," the statement from Colombo said.

President Rajapaksa sought the intervention of Prime minister Modi to revive some of the key projects as Sri Lanka strives to restore the economy, the statement said.

Rajapaksa asked prime minister Modi to “direct those responsible from India’s side to expedite construction of the East Terminal of the Colombo Port as early as possible as it will be a significant boost to our economic landscape," the statement quoted the Sri Lankan President as saying.

“I am trying to promote value added industrial and agricultural activities," the president said adding he would be “happy if you could encourage Indian investors to start such investments, including Indian companies already in Sri Lanka to increase domestic value addition in the context of COVID-19 economic priorities."

Modi on his part assured Rajapaksa that he was personally committed to help Sri Lanka. “We are ready to help under terms that are favorable to Sri Lanka," Modi was quoted as saying by the Sri Lanka statement.

Modi also suggested to President to appoint an official to work directly on this regard with the Colombo based Indian High Commissioner Gopal Baglay, the statement added.

India has traditionally considered the Indian Ocean region and countries in its immediate neighbourhood as within its sphere of influence. But China is now increasingly making its presence felt in the Indian Ocean region through its investments through the signature Belt and Road Initiative as well as through an increased naval presence. In 2017, China opened its first overseas naval base in Djibouti. It has been steadily increasing fishing as well as other economic activities in the Indian Ocean region particularly along the east coast of Africa — developments that India is keeping a wary eye on.

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