Prime News, International (Colombo), April 23:- In an “unstinted and multi-faceted support” to Sri Lanka, which is grappling with its worst-ever economic crisis, India has extended the duration of the USD 400 million currency swap facility which had been concluded with the island nation in January.
This was the first extension of an international debt instrument to Sri Lanka after the government led by President Gotabaya Rajapaksa on April 12 temporarily suspended debt servicing.
The embattled government had announced an orderly default until the country came to an agreement with the International Monetary Fund (IMF) for a possible bailout package.
“India’s unstinted and multi-faceted support to Sri Lanka continued. As ongoing currency support, @RBI extended the duration of the US$ 400 million currency swap for @CBSL which was concluded in #January this year,” the High Commission of India said on Twitter.
However, the debt service suspension was not applicable to currency swap arrangements with other central banks. The debt default came as the island nation was grappling with its worst-ever economic crisis compounded by forex shortages and a balance of payments crisis.
Sri Lanka had also drawn on Indian credit lines worth USD 1 billion for essential imports and separate ones for the importation of fuel. The island nation’s central bank started borrowing from other central banks and the market through swaps as reserves were lost due to money printed to keep rates down, the Economy Next news service said in a report.
Sri Lanka’s economists have printed money under various pretexts, delayed market rate rises through various monetary instruments and triggered currency crises for 72 years and blamed them on budget deficits and imports, the report said. (MR, Inputs: Agencies).