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Central Bank of Sri Lanka settles $400 million currency swap with Reserve Bank of India

The Central Bank of Sri Lanka has announced that it has repaid a $400 million currency swap facility from the Reserve Bank of India.

This comes after India reportedly refused to extend the currency exchange which expired on 1 February 2021, stating it would not be possible without Sri Lanka negotiating a staff-level agreement for an IMF programme.

Both sides have clarified that the settlement is not related to the East Container Terminal deal worth an estimated $700 million which Sri Lanka pulled out of, however, there has been growing tension between the countries following Sri Lanka’s withdrawal.

Ajith Nivard Cabraal, Sri Lankan State Minister of Money and Capital Market and State Enterprise Reforms told the Hindu: “The two countries had agreed on the date earlier, this scheduled repayment has nothing to do with the ECT decision.”

The swap facility was obtained by the Central Bank of Sri Lanka on 31 July 2020 for three months with an additional three-month rollover until 1 February 2021.

The Rajapaksa administration has said it will not seek to obtain an IMF bailout but has instead looked towards China for further loans.

Tensions between Sri Lanka and India have been on the rise in recent weeks after India’s External Affairs Minister S Jaishankar condemned the death of four Tamil Nadu fishermen by the Sri Lankan Navy.

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