During Lankan Finance Minister Basil Rajapaksa’s recent visit to India to seek financing, Lanka requested a $ 1 billion line of credit for essential imports and a $ 500 million line of credit for imports. oil, Cabraal told ET in an exclusive Colombo interview.
Discussions are underway for a $ 400 million swap facility under the SAARC financial arrangement of the Reserve Bank of India, he further informed. In addition, other investment opportunities were also discussed during this visit, Cabraal informed. “There are many investment opportunities for Indian companies, and proximity, a well-trained workforce and strong logistical links will be additional benefits. Moreover, given Sri Lanka’s strategic geographic location and strong maritime connectivity, Sri Lanka would be a springboard for Indian multinationals to maximize their strengths to expand globally as well.
Indian support is sought in terms of government-to-government facilities, central bank-to-central bank facilities and open direct investment, Cabraal said. “The expected cooperation is likely to help the two countries to continue the large volumes of trade and financial flows that have been observed over the years.”
Sri Lanka, reeling from an economic crisis in the wake of Covid and growing debt due to China’s large borrowing, had reached out to India to boost its declining economy. India recently bailed out Lanka with fertilizer for island farmers after Chinese-made fertilizers had to be rejected for quality reasons.
ET reported earlier this month that India was urgently developing a package to help Sri Lanka following Basil Rajapaksa’s visit. India should urgently expand a food and health security program in Sri Lanka, as well as an energy security program and currency exchange, and also encourage Indian investment, officials told ET. It was agreed during Rajapaksa’s visit that the procedures to achieve these goals would be finalized quickly, within a mutually agreed timeframe.
Cabraal, who previously served as Minister of State for Finance, Capital Markets and State Enterprise Reforms, recalled that even during the pandemic, Sri Lanka continued to receive Indian aid. “… In July 2020, the Central Bank of Sri Lanka and the Reserve Bank of India entered into a bilateral currency swap agreement of US $ 400 million as part of the currencies for the South Asian Association for Regional Cooperation (ASACR) countries for 2019-2022, which was fully settled by Sri Lanka in February 2021. This swap facility allowed Sri Lanka to maintain liquidity in foreign currency short-term sufficient while managing international reserves at comfortable levels, and we hope to renew this facility soon, once again. ”
India has been among the top three source countries for foreign direct investment (FDI) to Sri Lanka in recent years. FDI inflows from India, including foreign borrowing from companies registered with the Sri Lanka Board of Investment, amounted to $ 80.4 million in the first half of 2021. This was around 87.7 million dollars. million in 2020 and $ 139.0 million in 2019, according to Cabraal. .
Asked about the economic recovery in Lanka, the governor of the Central Bank said: “We are already seeing signs of a strong economic recovery, signaling Sri Lanka’s ability to adapt to the new normal. Real GDP growth of 4.4% was recorded between January and September 2021, which is in line with the target of almost 5% annual growth in 2021. ”
The Central Bank’s six-month roadmap to ensuring the stability of the macroeconomic and financial system, which was announced in October 2021, further sets out the envisaged targets for the accumulation of official reserves in the short term, Cabraal said, adding: “In addition to discussions with India and China, the Central Bank is currently negotiating with the Central Bank of the Middle East and other regional central banks for SWAP facilities, which are now at an advanced stage.