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Sri Lanka looks to India for financial help as crisis grows

Sri Lanka’s central bank will borrow the money from the Reserve Bank of India to boost its gross reserves as part of a US $ 400 million currency swap, as Colombo’s economic crisis continues to grow in the wake of the coronavirus pandemic.

Sri Lanka’s Co-Cabinet spokesperson Information and Communication Minister Bandula Gunawardena confirmed that the cabinet had approved the deal, in a bid to boost foreign reserves.

The move comes as Fitch Ratings downgraded Sri Lanka, stating that Colombo has “large upcoming external debt redemptions and limited foreign-currency (FX) reserves”. “Its reserves are about USD7.2 billion, while the sovereign's external debt payments from May to December 2020 amount to USD3.2 billion, including a USD1.0 billion international sovereign bond payment due in October,” it added.

The World Bank also recently forecast Sri Lanka’s economy to contract by 3% this year.

The turn to Delhi comes after Sri Lanka’s defence secretary vehemently denied reports that Indian troops would be deployed to Sri Lanka to help tackle the coronavirus pandemic.

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