• Mon. Oct 18th, 2021

Sri Lanka expects $250 million to its dwindling FX Reserves from Bangladesh in Crucial July

The Central Bank of Sri Lanka is expecting a $250 million boost from its dwindling foreign exchnage reservers from the Bangladesh Bank in July.

“Inflows expected to the Central Bank include the SWAP facility of $ 250 million from the Bangladesh Bank expected in July 2021,” the CBSL, Governor, W D Lakshman responding to claims on Foreign Currency Liquidity crisis in the country’s Domestic Market said.

For the first time in its history, Bangladesh Bank recently approved $200 million currency SWAP line to the CBSL depleting foreign reserves which can be extended up to $500 million.

Sri Lanka’s FX reserves in May declined to $4.02 billion from $4.4 billion in previous month.

The SWAP facility with Bangladesh Bank is critical for the CBSL given that Sri Lanka has to settle a $1 billion maturing ISB in late July as there’s only limited room to roll over the maturing ISB due to the low credit rating of the country. At the same time, Sri Lanka’s import bill is also on the rise driven by rising fuel prices in the world market as exports struggle to recover from the pandemic.

The three-month SWAP facility was offered at the interest rate of LIBOR + 2 percent. If the tenure goes up to six months, the interest rate would be increased to LIBOR + 2.5 percent.

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