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Sri Lanka banks on RBI swaps to boost its reserves: PM Ranil Wickremesinghe

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Sri Lankan Prime Minister Ranil Wickremesinghe on Thursday said that the SAARC swap arrangement with the Reserve Bank of India (RBI) is part of the international assistance to boost the island's flagging reserves.

"The Reserve Bank of India has agreed to give our Central Bank USD 400 million under the SAARC currency swap arrangement. They (the Indians) are considering a further large sum," Wickremesinghe told parliament.

His remarks came a day after Sri Lanka's Central Bank on Wednesday said that the RBI has agreed to provide USD 400 million under the SAARC swap arrangement to boost the island nation's reserves. It said that a further request to the RBI for another SWAP arrangement of USD 1 billion is "under consideration".

Wickremesinghe said that Lanka will make its highest ever debt payment in history – USD 2600 million - on January 14.

"Within 2019 we have to pay USD 5900 million by way of interest and capital on foreign loans," he said.

Wickremesinghe said that the nearly two-month long political crisis had an adverse impact on the country's economy.

"During the 51 days, our Rupee fell by 3.8 per cent. When all other currencies were appreciating, the rupee was falling. There were capital outflows from the country," he said.

"We are yet to quantify the losses, but it was a death blow to an economy that was struggling to recover," Wickremesinghe told parliament.

President Maithripala Sirisena's dramatic move on October 26 to sack Prime Minister Wickremesinghe and install former strongman Mahinda Rajapaksa in his place following differences over policy issues, left the country without a functioning government for nearly two months. However, a Supreme court verdict forced Sirisena to reinstate Wickremesinghe.

Sri Lanka's reserves dipped from USD 7991 million to USD 6985 million during the crisis, the prime minister said.

Due to the political crisis, the big three credit rating agencies -- Fitch Ratings, Standard & Poor's (S&P) and Moody's -- downgraded Sri Lanka's sovereign rating.

Wickremesinghe said the government is in the process of raising USD 1.9 billion to boost its reserves. One billion dollars are to be raised in international markets while USD 500 million would be raised from Chinese Panda funds and Japanese Samurai Funds in addition to the USD 400 million from India's RBI under SAARC currency swap arrangement.

The government's priority right now is to work for the rupee's stabilisation, Wickremesinghe said. The weaker rupee has caused cost escalation of raw materials and all imports.