Funded entirely by India, the swap facility will enable the central banks of Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan and Sri Lanka to borrow funds in dollars, euros and Indian rupees, the Indian High Commission in Colombo said Monday.
“The swap amount available to various member central banks has been arrived at broadly based on two months import cover subject to a floor of 100 million dollars and a maximum of 400 million dollars per country,” it said.
Under the arrangement, member nations can withdraw dollars, euros and rupees for a period of three months at an interest rate of 200 basis points above the London interbank offered rate, or Libor, which can be rolled over twice. The second rollover will attract an additional interest of 50 basis points, the statement said.
The South Asian Association for Regional Cooperation or SAARC, has been working toward greater economic collaboration and enhancing a free-trade pact adopted in 2004.
The statement said the move for a swap arrangement was made in 2009, when foreign currency flows dried up amid the global credit crunch.
The swap arrangement intends to give a funding line to meet any balance of payment and liquidity crisis.