11:37 GMT05 July 2020
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    New Delhi (Sputnik): Sri Lanka’s economy has been badly hit by COVID-19 with a drastic fall in its foreign exchange reserves due to loss of exports and tourism. The island nation has a huge external debt of around $55 billion, or around 80 percent of its GDP.

    India has promised to consider Sri Lanka's request for a postponement of its debt repayments amidst the current economic crisis.

    A spokesperson for the Indian Mission in Colombo said that both countries were engaged in “close and constructive discussions” to reschedule a repayment of Sri Lanka's debt and a potential currency swap under bilateral and regional cooperation arrangements.  

    “In the post-COVID world, India remains committed to partner Sri Lanka closely for the latter’s sustained economic recovery and shared prosperity,” said the spokesperson.

    The clarification comes after Sri Lanka turned to China for help. Beijing has already approved an additional $500 million loan to the island nation to tide it over during the pandemic.

    Sri Lanka owes $960 million to India while its debt to China was $5 billion in 2018. Colombo was scheduled to pay $2.9 billion to New Delhi this year, but has sought a moratorium in view of the economic situation.

    Sri Lanka had also requested India’s central bank – the Reserve Bank of India - to provide it with a $400 million currency swap to boost its foreign reserves. The Framework on Currency Swap Arrangements for the South Asian Association for Regional Cooperation or SAARC is a backstop line of funding for short term foreign exchange liquidity to member nations subject to bilateral swap agreements. 

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    Tags:
    COVID-19, external debt, Colombo, Sri Lanka, New Delhi, India
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