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.