CBSL finally confirms IMF, B’desh funds

The Central Bank finally confirmed yesterday that Sri Lanka received Special Drawing Rights (SDR) allocation of International Monetary Fund (IMF) and the Initial Disbursements under the Currency Swap Arrangement with the Bangladesh Bank.

It said during August, Sri Lanka received its share of the global SDR allocation by the IMF and the initial disbursements under the bilateral currency swap arrangement between the Central Bank of Sri Lanka and the Bangladesh Bank.

The SDR allocation received by Sri Lanka was equivalent to $ 787 million while a sum of $ 150 million was received under the swap arrangement with the Bangladesh Bank.

The IMF distributed a total SDR allocation of equivalent to $ 650 billion among its member countries on 23 August, in proportion to their existing quotas in the IMF. 

This provides additional liquidity to the global economy, at a time of an unprecedented crisis due to the COVID-19 pandemic, supplementing countries’ foreign exchange reserves and reducing their reliance on expensive domestic and/or external debt. 

Countries can use the space provided by the SDR allocation to support their economies and step up their fight against the adverse effects caused by the pandemic. The IMF SDR allocation is not a loan from the IMF and no specific conditionalities attached to the allocation. Previously, the IMF had allocated SDRs to member countries in 2009, 1979-81, and 1970-72.

The foreign currency swap facility from the Bangladesh Bank totaling $ 200 million was agreed upon in view of strengthening economic and financial cooperation between the two countries. This swap facility has been provided for a period of three months with the possibility of rolling over twice for similar periods, and it will be disbursed in three tranches, i.e., $ 50 million, $ 100 million, and $ 50 million. The first two tranches have already been received.

CBSL also said the Government of Sri Lanka expects to receive the remainder of the syndicated loan from China Development Bank shortly. This disbursement completes the total syndicated loan of $ 1.3 billion from China Development Bank.

These foreign exchange receipts help improve the country’s Gross Official Reserves, while enabling the Central Bank to further facilitate the liquidity conditions in the domestic foreign exchange market. With the materialisation of envisaged inflows, including non-debt creating foreign currency inflows to the Government, Sri Lanka’s foreign exchange reserves are expected to improve further in the period ahead.