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China negotiates another currency swap with Sri Lanka

Sri Lanka is in negotiations with China regarding a currency swap, according to the Daily Mirror.

A Chinese embassy representative said that the People's Bank of China (PBOC) and the Central Bank of Sri Lanka (CBSL) would have a “negotiated amount” and “concrete developments” by the end of this month. 

Earlier this month, Sri Lanka’s state-owned Bank of Ceylon (BOC) established a long-term credit facility with China Development Bank (CDC), for USD $140 million - despite Sri Lanka’s worsening economic crisis. The CBSL is also expected to sign a US $1.1 billion currency swap deal with the Reserve Bank of India, this week.

In 2014 – when current Sri Lanka's Prime Minister, Mahinda Rajapaksa was president - there was an agreement between PBOC and CBSL for a $1.63 billion currency swap deal which aimed to “promote bilateral trade and strengthen financial cooperation between the two central banks.”

In 2018, the Hindu reported that Sri Lanka’s debt’s to China amassed over USD $5 billion. Despite Sri Lanka’s financial troubles worsening because of the coronavirus pandemic, they have persisted with turning to China for monetary assistance.

In May this year, China’s president, Xi Jinping called Sri Lankan president, Gotabaya Rajapaksa and insisted, “the strategic cooperative partnership between China and Sri Lanka is based on sincere mutual assistance and ever-lasting friendship” and “will grow stronger through the joint effort to contain COVID-19 pandemic.” China followed this by sanctioning the USD $140 million loan to Sri Lanka earlier this month, stating the loan, “will be utilised for supplementing Bank of Ceylon’s general lending requirements, which will provide much needed support for businesses affected by COVID-19”.

The currency swap agreement said to “further promote association between financial institutions of both countries” comes as China continues to extend its influence on Sri Lanka and further the country's crippling debt.

Read more here.

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