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Currency swap with China is in yuan: Central Bank

04 Apr 2021

  • Lakshman says yuan is internationally accepted

  • Harsha says yuan swap in just another bluff 

By The Sunday Morning Business Desk    Amidst questions from the Opposition asking whether Sri Lanka’s recent $ 1.54 billion currency swap with China is in yuan (Chinese currency), the Central Bank of Sri Lanka (CBSL) confirmed to The Sunday Morning Business that the swap is in fact in yuan.  Defending the yuan swap, Central Bank Governor Prof. W.D. Lakshman told us that yuan is an internationally accepted currency.  The People’s Bank of China last month approved a currency swap for Sri Lanka for a period of three years in order to reportedly weather off the existing financial burdens of the country, according to local reports.  Nevertheless, the swap has faced heavy criticism from Sri Lanka’s Opposition. Economist and former State Minister of National Policies and Economic Affairs Dr. Harsha de Silva, speaking to us, stated that Sri Lanka’s invoices are in dollars and added that the Government cannot certainly pay them using the so-called swap in yuan.  “You cannot pay a single dollar of debt with this yuan swap. The Government’s stance now is that they can pay for imports from China in yuan but in reality these imports are minimal. A significant portion of the invoices are from the US to whom the payments have to be made in dollars,” he added.  Speaking further, he noted that Sri Lanka might be able sort a couple of invoices that are issued in yuan, but added that this swap does not help the Government in any significant way to build the foreign reserves, which the Government is in dire need of at the moment. He quoted that swap as “just another bluff”.  Meanwhile, State Minister of Money and Capital Markets and State Enterprise Reforms Ajith Nivard Cabraal, in a recent tweet, encouraged entrepreneurs and investors to utilise the current policies to move in a positive direction.  “Our businesses and investors should factor in the positive developments during the past few days in their investment decisions: the swap with China, historically low levels of interest, the country opening up for tourism, the strong vaccination programme, the first IPO (initial public offering) in several years,” Cabraal tweeted. The Ministry of Finance made a firm statement, highlighting that it, in collaboration with the CBSL, is planning on meeting the country’s debt obligations through foreign inflows, export income, and taxes. According to Finance Ministry sources, the swap agreement was put in place to maintain sufficient short-term foreign exchange liquidity whilst preserving the foreign currency reserve position of the country.    


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