Reserve Bank of India extends fresh boost to Sri Lanka

Wednesday, 9 July 2025 00:06 - - {{hitsCtrl.values.hits}}

The Reserve Bank of India (RBI) has offered the Central Bank of Sri Lanka an extension to the remaining dues under the $ 2.6 billion Special Swap Arrangement signed, along with a reduction in interest rate, in a fresh boost to the economy and foreign reserves management.

The relief was firmed up during the visit by a RBI delegation to Colombo last week.

During the peak of the economic crisis, India has extended approximately $ 4 billion assistance to Sri Lanka. Out of that, approximately $ 2.6 billion was the Special Swap Arrangement between RBI and CBSL which included dues under the Asian Clearing Union and bilateral dues.

The outstanding of approximately $ 1.7 billion was due in October 2024. Taking into account the nascent economic recovery and the upcoming IMF discussions, India proactively extended the swap arrangement to support the economic stabilisation process in Sri Lanka.

In fact, the swap was extended by India in October 2024, even without the Government of Sri Lanka having to engage with the Government of India at a diplomatic level.

”The latest relief would pertain to over $ 1 billion,” sources told the Daily FT. They added that the relief is significant as Sri Lanka’s official foreign reserves are still approximately $ 6.28 billion, with a part unusable due to stringent conditions by the Chinese. The People’s Bank of China swap arrangement worth $ 1.5 billion is subject to conditionalities on usability including Sri Lanka’s reserves needing to be three months of imports.

India’s support including the emergency assistance to Sri Lanka stands at over $ 7 billion with grant assistance exceeding $ 800 million.

Separately, a $ 100 million worth of loans extended by India to Sri Lanka have been converted into loans.

During the State visit of Indian Prime Minister Narendra Modi to Sri Lanka in April 2025, the Sri Lankan Government had requested for further extension with reduction of interest rate to which India agreed.

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