Sri Lanka has received $787 million from the International Monetary Fund’s (IMF) special drawing rights (SDR) allocation and $150 million from Bangladesh Central Bank as a currency swap arrangement, boosting the island nation’s depleting foreign exchange reserves as it struggles to recover from the coronavirus pandemic.
The IMF distributed a total SDR allocation of equivalent to $650 billion among its member countries on August 23, 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.
“The SDR allocation received by Sri Lanka was equivalent to $787 million while a sum of the U.S. dollars 150 million was received under the swap arrangement with the Bangladeshi bank,” Central Bank of Sri Lanka said in a statement on Tuesday.
The 150 million dollar swap, a part of the total $200 million facility, has been provided for three months with the possibility of rolling over twice for similar periods.
The bank said it was also expecting the remainder of the syndicated loan from China Development Bank shortly.
“These foreign exchange receipts help improve the country’s gross official reserves,” the bank said, adding that it will facilitate liquidity in the domestic foreign exchange market.
In a bid to save its reserves, Sri Lanka had severely restricted imports since the onset of the COVID-19 pandemic last year.
The Sri Lankan Rupee depreciated against the dollar amidst the pandemic with experts warning of a dollar black market being created.
They pointed out that while the Central Bank indicated that the rate of the dollar was rupees 210, the commercial banks were selling the dollar at 228 rupees.
Sri Lanka’s economy was struggling before the pandemic struck, laying low a tourism industry that is a vital source of foreign exchange earnings.
Visitors were staying away after deadly suicide bombings on Easter Day 2019 killed more than 250 people. But efforts to revive the industry failed after the pandemic struck.