Sri Lanka is among the SAARC member countries that would benefit from the offer of a US$ 2 billion Swap Arrangement from Reserve Bank of India (RBI).
The Swap Arrangement announced by the Governor of Reserve Bank of India Dr. D. Subbarao on May 16 at the 24th SAARC FINANCE Governors' Meeting in Nepal aims at strengthening regional financial and economic cooperation.
The facility will be available to all SAARC member countries including Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka and the member countries can now approach RBI for availing of the facility.
The SAARC Swap Arrangement that will have a corpus of US$ 2 billion will be offered in US dollar, Euro or Indian Rupee against the domestic currency or domestic currency denominated government securities of the requesting country. India will contribute to the entire fund.
The swap facility is expected to further economic cooperation within the SAARC region, pave the way for increased intra-regional trade, and contribute to enhancing the region's collective welfare.
Under the arrangement Sri Lanka Central Bank can have a swap amount based on two months import cover subject to a floor of US$ 100 million and a maximum of US$ 400 million.
The Central Bank will need to enter bilateral swap agreements, which need final approval from the Government of India, the Indian High Commission in Colombo said.
Under the facility, the requesting member countries can make drawals of US dollar, Euro or Indian Rupee in multiple tranches. Each drawal is of three months tenor and can be rolled over twice.
The Swap Arrangement is intended to provide a back stop line of funding for the SAARC member countries to meet any balance of payments and liquidity crises, till longer term arrangements are made or if there is a need for short-term liquidity due to market turbulence.
The SAARC Swap facility is being offered by the Reserve Bank of India pursuant to the decision of SAARC Finance Ministers at the SAARC Ministerial Meeting on Global Financial Crisis, held on February 28, 2009, which noted that "A major cause of current concern in the region is the drying up of credit and the contraction of financial markets. Mechanisms must, therefore, be developed aimed at creating bilateral arrangements in the region to address short-term liquidity difficulties and to supplement international financing arrangements."