The Government will shortly opt for currency swap arrangements with China and India for US$ 2.5 billion aimed at boosting Sri Lanka’s foreign currency reserves and maintaining foreign exchange liquidity, The Sunday Times reported quoting Treasury and Central Bank officials.
Cabinet approval will be sought shortly for the proposed currency swap with China’s Central Bank – the People’s Bank of China — and the Reserve Bank of India, Sunday Times report added.
A currency swap is a transaction in which two parties exchange an equivalent amount of money with each other but in different currencies. The parties are essentially loaning each other money and will repay the amounts at a specified date and exchange rate.
Accordingly, the Central Bank hopes to enter into a currency swap of US$ 1.5 billion with the Chinese Central Bank and US$ 1 billion with the Reserve Bank India, payable in three years and one year respectively.