Sri Lanka, which is facing a foreign exchange deficit, has obtained a loan of $ 1 billion in Chinese currency to repay in three years.
The Central Bank of Sri Lanka has obtained 10 billion yuan from the People’s Bank of China through an agreement known as a bilateral currency swap.
“The exchange agreement has been approved by the Cabinet on the recommendation of the Monetary Board of the Central Bank of Sri Lanka,” the government announced.
Due to the difficulty of using Chinese currency loans in other countries, it will have to spend to buy Chinese products and services.
According to the Government Information Department, the money will be used to promote bilateral trade and direct investment for the economic development of the two countries and to be used for other purposes with the consent of both parties.
The government has not revealed what those ‘other motives’ are.
Governor of the Central Bank of Sri Lanka Prof.W. D. Lakshman and Dr. Yi Gang, Governor of the People’s Bank of China, signed the agreement.
A bilateral statement issued by Prime Minister Mahinda Rajapaksa following his recent visit to Bangladesh also stated that discussions were underway to obtain a money transfer from Bangladesh as well.
Last month, the Central Bank paid off the $ 400 million it had exchanged with India.
The money was first withdrawn from the Central Bank of India in July to be repaid in three months. At the request of the Central Bank of Sri Lanka, India has agreed to postpone the repayment for another three months as the Government of Sri Lanka has not been able to obtain the approval of the International Monetary Fund.
The Government points out that the People’s Republic of China is the largest source of imports in Sri Lanka.
According to the Government Information Department, the value of imports from China in 2020 was US $ 3.6 billion. It is 22.3% of Sri Lanka’s imports.