The Reserve Bank of India (RBI) and the Government of India have recently introduced an updated Currency Swap Arrangement Framework for SAARC countries, effective from 2024 to 2027. This initiative aims to provide short-term foreign exchange liquidity support and address balance of payment crises within the SAARC region. The SAARC Currency Swap Facility was originally launched in 2012 to provide a financial safety net for member countries.
The new Currency Swap Arrangement includes an INR Swap Window with a corpus of ₹250 billion and a US Dollar/Euro Swap Window with a total corpus of US$ 2 billion. All SAARC member nations will have access to the facility by accepting bilateral swap agreements. SAARC countries include Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka, each with different economic sizes.
India, as the largest economy in the SAARC region, plays a significant role in supporting other member nations in their socio-economic development and financial growth. The revised currency swap is expected to bring stability and confidence to the region, as well as provide liquidity support, strengthen economic relations, facilitate trade, aid in debt management, and mitigate financial crises.
India’s trade relations with SAARC countries, particularly Bangladesh, Sri Lanka, Nepal, and Bhutan, are crucial for the region’s economic growth and stability. Total trade volumes exceed USD one billion with these countries, showcasing India’s pivotal role in fostering mutual growth and stability. India’s exports to these countries include machinery, vehicles, textiles, and pharmaceuticals, while imports consist of textiles, fish, petroleum products, and machinery.
The updated Currency Swap Framework for SAARC countries reflects India’s commitment to regional economic resilience and financial stability. By offering short-term cash support, minimizing balance of payment situations, and promoting stronger economic relations, this framework is a step towards a more stable and cooperative economic environment in the SAARC region. Despite potential challenges, the proactive approach taken by RBI and the Government of India is essential for meeting short-term financial requirements and fostering long-term economic integration in South Asia.
