Sri Lanka-China 10 b yuan currency swap deal: Facility available for Central Bank of Sri Lanka to draw from

  • China’s People’s Bank in on the deal
  • Cabraal dismisses ‘Chinese debt trap’
  • Annual debt servicing $ 4.5 b till 2025

BY Yoshitha Perera 

The three-year currency swap deal reached between Sri Lanka and China for 10 billion yuan ($ 1.5 billion), with the aim of promoting bilateral trade and direct investment for bilateral economic development, is presently in place for the Central Bank of Sri Lanka (CBSL) to draw from when needed, The Sunday Morning learnt.

Speaking to The Sunday Morning, State Minister of Money, Capital Market, and State Enterprise Reforms Ajith Nivard Cabraal confirmed the swap deal was in place.

“The CBSL will draw from it, if and when necessary,” he said. Cabraal further noted that the Government is naturally keen to optimise its usage of every financial instrument.

The CBSL and the People’s Bank of China (PBoC) entered into a bilateral currency swap agreement in March 2021, with a view to promote trade and investment between the two countries.

According to a statement shared by the CBSL in this regard, China remains Sri Lanka’s largest source of imports, which, in 2020, amounted to $ 3.6 billion – 22.3% of the country’s imports.

Addressing certain reports on loans received from China at a media briefing held on Friday (3), Cabraal claimed that going by the current data on Sri Lanka’s foreign debt, any allegations of the country being caught in a Chinese debt trap is untrue.

“It is a myth that Sri Lanka is in a debt trap caused by the consequences of borrowing from China. If people were to look at the debt profile of Sri Lanka as well as its debt servicing capacity, they would realise that the country has the ability to repay, and that no lender can control Sri Lanka’s way forward,” he claimed.

Nevertheless, according to information provided to The Sunday Morning by former CBSL sources, the country is obligated to pay nearly $ 4.5 billion per annum in foreign debt servicing payments until 2025.