ECONOMYNEXT – Sri Lanka’s cabinet of ministers had approved a 400 million US dollar swap line with the Reserve Bank of India, co-cabinet spokesman Minister Bandula Gunewardene said.
Sri Lanka’s central bank will borrow the money from the RBI to boost its gross reserves.
Sri Lanka’s soft-currency peg with the US has come under pressure due to liquidity injections made by the central bank amid the Coronavirus crises.
Analysts had pointed out that risks of monetary stability went up during the tenure of ex-Governor Indrajit Coomarasway after a policy corridor was narrowed and a mid-rate started to be targeted with unlimited excess liquidity.
Sri Lanka’s rupee had been trading erratically with almost no premiums between spot and forward rates.
Source: Economy Next
Image Courtesy: Yahoo!
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