PBoC swap facility sees sharp dip due to currency shifts; renewed as zero-cost standby arrangement
The strengthening of the Sri Lankan rupee in 2024 led to a significant decline in the rupee value of the country’s 10 billion yuan swap facility with the People’s Bank of China (PBoC), with Central Bank data revealing a reduction of Rs. 48.7 billion.
According to the Central Bank’s latest financial statements and operational report, the depreciation of the Chinese yuan by 13.9% against the rupee was the primary reason for the drop. The swap, valued at Rs. 459.9 billion at the end of 2023, had fallen to Rs. 411.2 billion by the close of 2024.
Despite the valuation loss, the Central Bank and the PBoC successfully renewed the swap agreement for an additional three years in December 2024. Originally signed in 2021, the agreement allows for a currency exchange of up to 10 billion yuan (approximately $1.5 billion) under a zero-cost standby facility, with no immediate financial outflows unless utilized.
The facility remains untapped, primarily due to a condition requiring Sri Lanka to maintain a three-month import cover to activate the funds. As of end-April 2025, Sri Lanka’s foreign reserves stood at $6.3 billion, providing four months of import cover, thereby meeting the eligibility requirement.
The Central Bank’s total foreign liabilities have also seen a marked reduction, declining to Rs. 868.5 billion by end-2024 from Rs. 1.26 trillion the previous year. This was driven by both the yuan swap’s depreciation and repayments related to the Reserve Bank of India swap facility.