Jul 09, 2020 (LBO) – The Federal Reserve in the United States has opened a temporary repurchase agreement facility for foreign central banks including Sri Lanka to support the smooth functioning of financial markets.
According to the Fed, the facility reduces the need for central banks to sell their Treasury securities outright and into illiquid markets, helping stabilize trading in the world’s most secure and important asset.
Under this facility, central banks temporarily exchange their US Treasury securities held with the Federal Reserve for US dollars, which can then be made available to institutions in their jurisdictions.
Central Bank Senior Deputy Governor Nandalal Weerasinghe told reporters Thursday that Sri Lanka has been offered up to a one billion US dollar Repo facility.
“Whenever the government is not going to bring new money for their debt service payments, we have an obligation to meet those payments out of our reserves,” Dr. Weerasinghe said.
“Then we might have liquidity needs going forward, in that situation we have this facility now open. We can use it if necessary, but we have not utilized it yet.”