On Monday a USD 500 Million Foreign Currency Term Financing Facility (FTFF) was signed in Beijing between the China Development Bank (CDB) and Sri Lankan Finance Ministry.
This is the second tranche of the total RMB 2 billion plus (USD 1 billion) FTFF pledged by the Chinese side to Sri Lanka after the outbreak of COVID-19 pandemic. The Chinese embassy in Sri Lanka described as a Sinhala/Tamil New Year gift.
Earlier in March, the two Central Banks also entered into a bilateral currency swap agreement amounting to CNY 10 billion (approximately US$ 1.5 billion) valid for a period of three years, with a view to promoting bilateral trade and direct investment for eco-social development of the two countries.
This FTFF was requested by the Sri Lankan government under current financial situation in the island nation and the background of fighting COVID-19 pandemic with all-out efforts. It is with a maturity period of ten years (including a grace period of three years), which is the longest tenure of term financing facilities for Sri Lanka.
The financing cost is highly competitive and kept the same as the first tranche, which highlights the two countries’ all-weathered friendship and mutual commitment throughout adversity.
The inflow of the funding is set to be implemented during the Sinhala & Tamil New Year, and expected to increase the official foreign reserves of Sri Lanka to better facilitate rapid economic recovery following the setbacks caused by the COVID-19 pandemic.