Colombo, Jun 16 (PTI) Sri Lanka is discussing with China to change the terms and conditions of the $1.5 billion currency swap deal with Beijing so that it can be used for imports amid of an unprecedented economic crisis in this island nation, according to a media report said Thursday.

According to the terms and conditions stipulated in the agreement signed with China for the swap agreement, the amount can only be used if Sri Lanka has sufficient foreign exchange reserves for three months. The swap deal was signed last year.

The agreement is suspended because Sri Lanka no longer has the required amount of reserves. The swap deal allows Sri Lanka to borrow Chinese currency for payment of imports, the Daily Mirror newspaper reported, citing a source.

However, the Sri Lankan authorities have now asked the Chinese side to modify the particular clause of the agreement to use this monetary facility granted to Sri Lanka, according to the report.

According to the source, the Sri Lankan side informed that the amendment of the clause would be beneficial for China since it would be used for imports of Chinese products, she said.

Sri Lanka has signed a 10 billion yuan (about $1.5 billion) currency swap agreement with China for a period of three years to be used to promote bilateral trade and direct investment between the two countries , the Central Bank of Sri Lanka announced in March last year. . The agreement was signed between the Central Bank of Sri Lanka (CBSL) and the People’s Bank of China (PBoC).

The deal came as Sri Lanka was going through a tough time with COVID-19, dealing a severe blow to its economy, especially its $4.5 billion tourism industry which had already been hit by the terrorist attacks. Easter Sunday in 2019.

Sri Lanka is currently facing its worst economic crisis since its independence from Britain in 1948.

The economic crisis has caused severe shortages of essential items like food, medicine, cooking gas and other fuels, toilet paper and even matches, with Sri Lankans forced to queue for hours outside shops to buy fuel and cooking gas.

Meanwhile, China reaffirmed its continued and concrete support, including subsidies, trade and investment in Sri Lanka to help the debt-ridden country overcome its worst economic crisis.

The Chinese Embassy in Sri Lanka said on Twitter that Chinese banks are ready to negotiate with Sri Lanka to properly manage overdue debts.

“On June 14, Ambassador Qi Zhenhong called Prime Minister Ranil Wickremesinghe and reaffirmed China’s continued and concrete support, including subsidies, trade and investment in Sri Lanka during the current crisis. Chinese banks are also ready to negotiate with Sri Lanka to properly manage overdue debts,” the embassy tweeted.

Sri Lanka is also in negotiations with several Chinese companies to buy chemical fertilizers on credit for the next Maha season. The Department of Agriculture is now required to come out with the quantity of needs.

India has provided a $55 million line of credit to Sri Lanka for the import of fertilizers, in a bid to help the island nation overcome its food shortage, India’s high commission said last week.

Addressing Parliament recently, Prime Minister Wickremesinghe said Sri Lanka will need $5 billion to ensure that people’s daily lives are not disrupted for the next six months.

The country on the verge of bankruptcy, with an acute currency crisis that led to a default on external debt payments, announced in April that it was suspending the repayment of nearly $ 7 billion in external debt due for this year on approximately $25 billion due through 2026.

(This article was published from a news feed without any text changes. Only the title has been changed.)