In what seems a temporary respite for Sri Lanka’s dwindling forex reserve, the Central Bank of Sri Lanka (CBSL) has signed a $1.5 billion currency swap agreement with China, reported Colombopage.

Issuing a statement on Monday, the CBSL said, “ The Central Bank of Sri Lanka and the People’s Bank of China (PBoC) entered into a bilateral currency swap agreement with a view to promoting bilateral trade and direct investment for the economic development of the two countries, and to be used for other purposes agreed upon by both parties.” 

China accounted for the largest imports for Sri Lanka in 2020, with total imports to Sri Lanka touching $3.6 billion, roughly 22 percent of all the goods it imported in the year.

The agreement was approved by the Sri Lanka Cabinet upon the recommendation of the Monetary Board of CBSL. On Monday, the governors of the two Central Banks, Deshamanya Professor W D Lakshman of CBSL and Dr. Yi Gang, Governor of PBOC, inked the deal.

Under this agreement, CBSL is entitled to a swap facility amounting to CNY 10 billion (approximately US$ 1.5 billion). The agreement is valid for a period of three years.

The deal came after Sri Lanka failed to renew its credit line with India as the latter said that further extension of the credit line would only be possible if Sri Lanka entered into an agreement with the IMF.