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Current Affairs for UPSC IAS Exam – 30 June 2021

Contents

  1. Survey on Religious Tolerance and Freedom in India
  2. India to tap Iran for oil if prices stay high
  3. GSI: Chamoli disaster caused by avalanche
  4. Atlas of glacial lakes in Ganga basin released
  5. Sri Lanka ‘banking on’ $1 bn India swap deal

Survey on Religious Tolerance and Freedom in India

Context:

Recently a nation-wide survey on religious attitudes, behaviours and beliefs in India was conducted by Pew Research Center, a non-profit based in Washington DC.

Relevance:

GS-II: Polity and Governance (Constitutional Provisions, Fundamental Rights), GS-I: Indian Society

Dimensions of the Article:

  1. Fundamental Right to Freedom of Religion in India
  2. Secularism in India
  3. Religious Diversity in India
  4. Highlights of the survey on Religious Tolerance and Freedom in India

Fundamental Right to Freedom of Religion in India

Freedom of religion in India is a fundamental right guaranteed by Article 25-28 of the Constitution of India.

Article 25: Freedom of conscience and free profession, practice and propagation of religion

  • Article 25 is the bedrock of secularism in India and it states that people have the freedom to
    1. Conscience (inner freedom of thought),
    2. Profess (declare one’s religious beliefs openly),
    3. Practice (perform religious worship), and
    4. Propagate (dissemination of one’s religious beliefs) their religion.
  • The Right to Propagate religion does NOT include the right to convert another person to a particular religion.
  • Thus, Article 25 covers not only religious beliefs (doctrines) but also religious practices (rituals).
  • However, the rights guaranteed under Article 25 are subject to reasonable restrictions to maintain public order, morality and health.
  • Religious rights under Article 25 are available to both citizens and non-citizens.

Article 26: Freedom to manage religious affairs

  • Article 25 gives freedom to an individual, while Article 26 deals with an entire religious denomination or any of its section.
  • Under Article 26, every religious denomination or any section thereof shall have the right to:
    1. establish and maintain institutions for religious and charitable purposes;
    2. manage its own affairs in matters of religion;
    3. own and acquire movable and immovable property; and
    4. administer such property in accordance with law
  • The rights guaranteed under Article 26 are also subject to reasonable restrictions to maintain public order, morality and health.

Article 27: Freedom as to payment of taxes for promotion of any particular religion

  • Article 27 prohibits the State from spending any public money collected by way of tax for the promotion of any religion.
  • In other words, the state should not spend the public money collected by way of tax for the promotion or maintenance of any particular religion.
  • This provision prohibits the state from favouring, patronizing and supporting one religion over the other.
  • This also means that taxes can be used for the promotion or maintenance of all religions.
  • Article 27 prohibits only the levying of a tax and not a fee. This is because the purpose of a fee is to control secular administration of religious institutions and not to promote or maintain a religion. Thus, a fee can be levied on pilgrims to provide them with some special service or safety measures.

Article 28: Freedom as to attendance at religious instruction or religious worship in certain educational institutions

  • Article 28 prohibits religious instruction (religious teachings) from being provided in educational institutions that are Wholly Maintained by State funds.
  • Article 28 distinguishes between 4 types of religious institutions and has different restrictions on providing religious instructions for different types:
 Type of Educational InstitutionStatus of Religious Instruction
1.Wholly Maintained by StateCompletely Prohibited
2.Administered by the State, but established under some trust or endowmentPermitted – no conditions
3.Just Recognized by StatePermitted – but only with consent (or Guardian’s consent in case of a minor)
4.Just Receiving Aid from StatePermitted – but only with consent (or Guardian’s consent in case of a minor)

Secularism in India

  • Secularism is a principle that advocates separation of religion from civic affairs and the state.
  • The term means that all the religions in India get equal respect protection and support from the state.
INDIAN SECULARISMWESTERN SECULARISM
Equal protection by the state to all religions. It reflects certain meanings. First secular state to be one that protects all religions, but does not favour one at the cost of others and does not adopt any religion as the state religion.Separation of state and religion as mutual exclusion means both are mutually exclusive in their own spheres of operation.
In the Indian context, secularism has been interpreted as the state maintaining an “arm’s length distance” from ALL religions.Western secularism can be seen as the state refusing to interact with any form of religious affairs.

Religious Diversity in India

  • India is one of the most diverse nations in terms of religion, it being the birthplace of four major world religions: Jainism, Hinduism, Buddhism and Sikhism.
  • Even though Hindus form close to 80 percent of the population, India also has region-specific religious practices: for instance, Jammu and Kashmir has a Muslim majority, Punjab has a Sikh majority, Nagaland, Meghalaya and Mizoram have Christian majorities and the Indian Himalayan States such as Sikkim and Ladakh, Arunachal Pradesh and the state of Maharashtra and the Darjeeling District of West Bengal have large concentrations of Buddhist population.
  • The country has significant Muslim, Sikh, Christian, Buddhist, Jain and Zoroastrian populations.
  • Islam is the largest minority religion in India, and the Indian Muslims form the third largest Muslim population in the world, accounting for over 14 percent of the nation’s population.

Highlights of the survey on Religious Tolerance and Freedom in India

  • The report found that 91% of Hindus felt they have religious freedom, while 85% of them believed that respecting all religions was very important ‘to being truly Indian’.
  • Also, for most Hindus, religious tolerance was not just a civic virtue but also a religious value, with 80% of them stating that respecting other religions was an integral aspect of ‘being Hindu’.
  • Other religions showed similar numbers for freedom of religion and religious tolerance. While 89% of Muslims and Christians said they felt free to practice their religion, the comparative figures for Sikhs, Buddhists and Jains were 82%, 93%, and 85% respectively.
  • On the question of religious tolerance, 78% of Muslims felt it was an essential aspect of being Indian, while 79% deemed it a part of their religious identity as Muslims. Other religious denominations scored similarly high on religious tolerance.
  • The survey also revealed a number of shared beliefs that cut across religious barriers. For example, while 77% of Hindus said they believed in karma, an identical percentage of Muslims said so as well.

Sad news regarding religious segregation

  • Despite shared values and a high regard for religious tolerance, the majority in all the faiths scored poorly on the metrics for religious segregation: composition of friends’ circle, views on stopping inter-religious marriage, and willingness to accept people of other religions as neighbors.
  • Relatively few Indians (13%) had a mixed friends circle – people belonging to smaller religious groups were less likely than Hindus and Muslims to say that all their friends were of the same religion.
  • On the question of inter-religious marriage, most Hindus (67%), Muslims (80%), Sikhs (59%), and Jains (66%) felt it was ‘very important’ to stop the women in their community from marrying outside their religion (similar rates of opposition to men marrying outside religion). But considerably fewer Christians (37%) and Buddhists (46%) felt this way.
  • The majorities in all the religious groups were, hypothetically, willing to accept members of other religious groups as neighbours, but a significant number had reservations. About 78% of Muslims said they would be willing to have a Hindu as a neighbour. Buddhists were most likely to voice acceptance of other religious groups as neighbours, with roughly 80% of them wiling to accept a Muslim, Christian, Sikh or Jain as a neighbour, and even more (89%) ready to accept a Hindu neighbour.

Political Factor

  • Interestingly, the survey found that Hindus who voted for the BJP in the 2019 elections tended to be less accepting of religious minorities in their neighbourhood.
  • Only about half of the Hindus who voted for the BJP said they would accept a Muslim (51%) or a Christian (53%) as neighbours, compared with higher shares of those who voted for other parties (64% and 67% respectively).
  • About 60% of Hindu voters who linked Indian identity to being Hindu and speaking in Hindi voted for the BJP, compared with only a third among Hindu voters for whom these aspects did not matter for national identity.

Geographical Factor

  • Geography was a key factor in determining attitudes, with people in the south of India more religiously integrated and less opposed to inter-religious marriages.
  • People in the South “are less likely than those in other regions to say all their close friends share their religion (29%),” noted the report.
  • Also, Hindu nationalist sentiments were less prevalent in the South. Among Hindus, those in the South (42%) were far less likely than those in Central states (83%) or the North (69%) to say that being Hindu was very important to being truly Indian.
  • Also, people in the South were somewhat less religious than those in other regions: 69% said religion was very important to their lives, while 92% in Central India held the same view.

Religious identity and nationalism

  • The survey also found that Hindus tend to see their religious identity and Indian national identity as closely intertwined, with 64% saying that it was ‘very important’ to be Hindu to be “truly” Indian.
  • Most Hindus (59%) also linked Indian identity with being able to speak Hindi. And among Hindus who believed it was very important to be Hindu in order to be truly Indian, a full 80% also believed it was very important to speak Hindi to be truly Indian.

-Source: The Hindu


India to tap Iran for oil if prices stay high

Context:

  • Ahead of a critical OPEC meeting India’s Petroleum and Natural Gas Minister said that India is persuading oil exporting countries to moderate surging oil prices and warned that high prices would push the country to tap alternative petroleum import sources such as Iran.
  • India’s Finance Minister called for speedier monetisation of oil and gas assets in 2021 and asked Ministries to expedite capital expenditure projects to revitalise the economy after the second wave of COVID-19.

Relevance:

GS-III: Indian Economy (International Trade, Mobilization of Resources, Growth and Development of Indian Economy), GS-III: Industry and Infrastructure

Dimensions of the Article:

  1. About India’s challenge with increasing oil prices
  2. Finance Minister on Handling the strain
  3. About Organization of the Petroleum Exporting Countries (OPEC)
  4. Way Forward Options for India

Click Here to learn why crude oil prices are rising and what is the impact on India.

About India’s challenge with increasing oil prices

  • Stressing that inflation was a major challenge for the economy, India’s Petroleum and Natural Gas Minister said that India had already exhausted strategic petroleum reserves it had built up in 2020 by taking advantage of lower oil prices.
  • Indian Minister also indicated that India would opt for whichever option provided competitive prices within its ‘global diplomatic framework’, including Iran if the economic sanctions imposed on it by the U.S. were lifted.
  • The Minister exuded confidence that the demand for petroleum products would return to pre-pandemic levels by the end of 2021.
  • The Organization of Petroleum Exporting Countries and its allies (OPEC+) are expected to discuss a possible easing of supply cuts, amid a rebound in global demand, on July 1 2021.

Finance Minister on Handling the strain

  • The Petroleum and Natural Gas Ministry was asked to expedite monetisation of assets as a step to ramp up capex. [Capital expenditures (CAPEX) are major purchases a company makes that are designed to be used over the long term – i.e., for purchases of significant goods or services that will be used to improve a company’s performance in the future.]
  • While the Budget has provided an outlay of ₹5.54 lakh crore for FY22, the finance minister said public sector enterprises need to complement it with their own steps to ramp up capex.
  • The finance minister also asked the Ministry of Housing and Urban Affairs to try to front-load capital spending and facilitate private investment by providing support and removing bottlenecks.

About Organization of the Petroleum Exporting Countries (OPEC)

  • The Organization of the Petroleum Exporting Countries is an intergovernmental organization of 14 nations, founded in 1960 in Baghdad by the first five members (Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela), and headquartered since 1965 in Vienna, Austria.
  • As of 2018, the 14 member countries accounted for an estimated 44 percent of global oil production and almost 82% of the world’s “proven” oil reserves, giving OPEC a major influence on global oil prices that were previously determined by the so-called “Seven Sisters” grouping of multinational oil companies.
  • The stated mission of the organization is to “coordinate and unify the petroleum policies of its member countries and ensure the stabilization of oil markets, in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers, and a fair return on capital for those investing in the petroleum industry.”

Way Forward Options for India

  • India needs pricing flexibility as well as the certainty of supply even during times when production falls due to any reason. Besides, choice of time of supply and flexibility on quantity (ability to reduce or increase) is what India should be looking at.
  • Indian refiners can look to reduce the quantity they buy through term contracts and instead buy more from the spot or current market.
  • Buying from the spot market would ensure that India can take advantage of any fall in prices on any day and book quantities. It’s like the stock market where shares can be brought on a day or time when the prices are low.
  • State-owned refineries have also been asked to coordinate buying and also explore joint strategy with private refiners such as Reliance Industries and Nayara Energy.

-Source: The Hindu


GSI: Chamoli disaster caused by avalanche

Context:

The Geological Survey of India said that the flash flood (February 2021) in Chamoli district, Uttarakhand was due to large mass of snow, ice and rock avalanche along with a hanging mass of rock crashing into the Raunthi Garh valley floor.

Relevance:

GS-III: Disaster Management, GS-I: Geography (Physical Geography, Important Geophysical Phenomena),

Dimensions of the Article:

  1. About the Chamoli Disaster
  2. Cause of the Chamoli Flash flood according to the GSI
  3. Why is the Chamoli incident of concern?
  4. What is an Avalanche?
  5. About the Geological Survey of India (GSI)

About the Chamoli Disaster

  • A flash flood in the Rishi Ganga river, a tributary of the Alaknanda in Chamoli district of Uttarakhand, on February 7, washed away a functional small hydroelectric project and destroyed the under-construction 520 MW Tapovan Vishnugad project of the NTPC on the Dhauli Ganga river. The flash flood also claimed at least 72 lives and caused at least 200 to be missing or dead.

Cause of the Chamoli Flash flood according to the GSI

  • The Geological Survey of India (GSI) said that the flash flood was caused due to a large mass of snow, ice and rock avalanche along with a hanging mass of rock crashing into the Raunthi Garh valley floor.
  • This impact pulverised the combination of rock, snow and ice causing a rapid flow downstream of Raunthi Garh and into the Rishiganga valley leading to the deluge.
  • A contributory factor, according to a senior scientist at the GSI, was unusually warm weather in the region – Observed change in the hydro-meteorological conditions such as heavy snowfall followed by sudden warmer climate possibly triggered this huge snow and rock avalanche/landslide causing sudden domino effect of flash flood in the downstream.
  • Climate change, that was triggering higher temperatures in the upper reaches of the Himalaya had a role and the constant freezing and thawing of ice made parts of rocks weak making them vulnerable to collapse.
  • There was no evidence of a Glacial Lake Outburst Flood (GLOF) having caused the event.

Why is the Chamoli incident of concern?

  • Deep movement of rock assemblages: Uttarakhand, which gained a distinct identity in the year 2000 as a separate State carved out from Uttar Pradesh, is geologically unique. As a part of the lesser Himalaya, in the populated terrane — a region bounded by earth faults — it remains active in terms of deep movement of rock assemblages.
  • Convergence boundary of two continental plates: As the northward moving peninsular India presses on, the lesser Himalaya rock assemblages are compressed and are pushed under the huge pile of the Great Himalayan rocks, the latter riding southwards onto and over the lesser Himalaya.
  • The Main Central Thrust: The MCT, running east-west along the Himalaya, is where the Indian and Eurasian plates connect. The result of these geological stresses, scientists say, is weakening of rocks, making the development of large dam projects in the region unwise.
  • Construction of dams:  In an assessment of the proposed 315-metre-high India-Nepal Pancheshwar dam project across the Kali river in the Kumaon region, with a drainage area of 12,000 sq. km, Shubhra Sharma and colleagues wrote in Current Science in 2019 that the chosen site could witness a strong earthquake in the Nepal area from the Rangunkhola Fault, perhaps of a magnitude of 7.4, with a potentially serious fallout.
  • Weak rocks: The geology of mountains in many parts of Uttarakhand is such that the threat of landslides is high. Rocks here have been weakened by natural processes across time and are vulnerable to intense rainfall as well as human interference, in the form of house-building and road construction.

What is an Avalanche?

  • An avalanche (also called a snowslide) is a rapid flow of snow down a slope, such as a hill or mountain.
  • Avalanches can be set off spontaneously, by such factors as increased precipitation or snowpack weakening, or by external means such as humans, animals, and earthquakes.
  • Primarily composed of flowing snow and air, large avalanches have the capability to capture and move ice, rocks, and trees.
  • Though they share similarities at first, avalanches are distinct from slushflows, mudslides, rock slides, and serac collapses. They are also different from large scale movements of ice.

About the Geological Survey of India (GSI)

  • The Geological Survey of India (GSI) was founded in 1851 and it is an attached office to the Ministry of Mines.
  • The GSI was founded for: (i) Conducting geological surveys and studies of India and (ii) Acting as a prime provider of basic earth science information to government, industry and general public, as well as the official participant in steel, coal, metals, cement, power industries and international geoscientific forums.
  • The main functions of GSI relate to creation and updation of national geoscientific information and mineral resource assessment.
  • These objectives are achieved through ground surveys, air-borne and marine surveys, mineral prospecting and investigations, multi-disciplinary geoscientific, geo-technical, geo-environmental and natural hazards studies, glaciology, seismotectonic study, and carrying out fundamental research.
  • Outcome of work of GSI has immense societal value. Functioning and annual programmes of GSI assume significance in the national perspective.
  • GSI, headquartered at Kolkata, has six Regional offices located at Lucknow, Jaipur, Nagpur, Hyderabad, Shillong and Kolkata and State Unit offices in almost all States of the country.

-Source: The Hindu


Atlas of glacial lakes in Ganga basin released

Context:

With concerns mounting over the impact of climate change on Himalayan glaciers, the Ministry of Jal Shakti has released an updated atlas of glacial lakes that are part of the Ganga river basin.

Relevance:

GS-I: Geography (Physical Geography, Distribution of Key Natural Resources, Water Resources, Important Geophysical Phenomena)

Dimensions of the Article:

  1. What is a Glacier?
  2. What are Glacial lakes?
  3. About the new Atlas of glacial lakes in Ganga basin
  4. Important Glaciers in India
  5. What is GLOF?
  6. How can the risk of GLOFs be reduced?

What is a Glacier?

  • A glacier is a persistent body of dense ice that is constantly moving under its own weight. It is form by the accumulation of snow exceeds its ablation (melting and sublimation) over many years. It is the largest reservoir of fresh water on the Earth (75 percent of the world’s fresh water).
  • Glaciers are unique because they are reservoir of fresh water, have sheer mass and their ability to move (Glaciers flow like very slow rivers). It may move in two ways- Internal flow is when the pressure and gravity on the ice in a glacier cause it to move downhill; Basal sliding is when an entire glacier moves because its base is slightly melted. Rivers, valleys and lakes are formed after melting of glaciers.
  • As per National Snow & Ice Date Centre, it occupies about 10 percent of the world’s total area.

What are Glacial lakes?

  • A glacial lake is a body of water with origins from glacier activity.
  • They are formed when a glacier erodes the land, and then melts, filling the depression created by the glacier.

How are glaciers and glacial lakes formed?

  • Glaciers are found on every continent except Australia and some are hundreds of thousands of years old; and a large cluster of glaciers are in the Himalayas.
  • Glaciers are made of layers of compressed snow that move or “flow” due to gravity and the softness of ice relative to rock.
  • A glacier’s “tongue” can extend hundreds of kilometers from its high-altitude origins, and the end, or “snout,” can advance or retreat based on snow accumulating or melting.
  • Proglacial lakes, formed after glaciers retreat, are often bound by sediment and boulder formations.
  • Additional water or pressure, or structural weakness, can cause both natural and manmade dams to burst, sending a mass of floodwater surging down the rivers and streams fed by the glacier.

About the new Atlas of glacial lakes in Ganga basin

  • About 4,707 glacial lakes have been mapped in the Ganga basin.
  • Recently, a similar inventory of glacial lakes was prepared for the Indus River basin.
  • Based on its process of lake formation, location, and type of damming material, glacial lakes are identified in nine different types, majorly grouped into four categories.
  • The area mapped spans from the origin of the river to foothills of Himalayas covering a catchment area of almost 2.5 lakh sq. Km. The study portion of Ganga River basin covers part of India and transboundary region.

Uses of the Atlas of Glaciers and Glacial Lakes

  • The expected “utility” of the atlas, according to a statement from the Ministry was to create a “comprehensive and systematic” glacial lake database for Ganga River basin.
  • The atlas could be used as reference for carrying out changes in the lakes over time, the spatial extent (expansion/shrinkage), and formation of new lakes.
  • The information on glacial lakes including their type, hydrological, topographical, and associated glaciers are useful in identifying the potential critical glacial lakes and consequent GLOF (Glacial Lake Outburst Flood) events. These refer to disasters whereby a deluge of water from such a lake can trigger a disaster.

Important Glaciers in India

Name StateMountain Range
Batura GlacierJammu & KashmirKarakoram Mountain Range
Khurdopin GlacierJammu & KashmirKarakoram Mountain Range
Hispar GlacierJammu & KashmirKarakoram Mountain Range
Biafo GlacierJammu & KashmirKarakoram Mountain Range
Baltoro GlacierJammu & KashmirKarakoram Mountain Range
Chomolungma glacierJammu & KashmirKarakoram Mountain Range
Diamir GlacierJammu & KashmirKarakoram Mountain Range
Siachen GlacierJammu & KashmirKarakoram Mountain Range
Gangotri GlacierUttarkashi, UttarakhandHimalayas
Milam GlacierUttarakhandTrishul peak of  Pithoragarh
Pindari glacierNanda Devi, UttarakhandUpper reaches of the Kumaon Himalayas
Zemu GlacierSikkimEastern Himalaya Located on Kanchenjunga peak
The Glaciers of the Himalaya – Geography and You

What is GLOF?

  • A GLOF is a type of outburst flood that occurs when the dam containing a glacial lake fails.
  • An event similar to a GLOF, where a body of water contained by a glacier melts or overflows the glacier, is called a jökulhlaup.
  • The dam can consist of glacier ice or a terminal moraine.

Causes of GLOF

  • A buildup of water pressure or structural weakness of boundary due to an increase in the flow of water.
  • An earthquake (Tectonic) or cryoseism (non-tectonic seismic event of the glacial cryosphere) can also cause GLOF. During this, the boundary of the glacial lake will collapse suddenly and release the water in the glacial lake.
  • An avalanche of rock or heavy snow: During this, the water in the glacial lake might be displaced by the avalanche.
  • Volcanic eruptions under the ice can also cause GLOF. These volcanic eruptions might displace the boundary or increase the pressure on glacial lake or both.
  • Heavy rainfall/melting of snow: This can lead to massive displacement of water in a glacial lake.
  • Long-term dam degradation can also induce GLOF.
  • Other reasons such as the collapse of an adjacent glacial lake, etc.

How can the risk of GLOFs be reduced?

  • The NDMA guidelines say that risk reduction has to begin with identifying and mapping such lakes, taking structural measures to prevent their sudden breach, and establishing mechanism to save lives and property in times of a breach.
  • Potentially dangerous lakes can be identified based on field observations, records of past events, geomorphologic and geotechnical characteristics of the lake/dam and surroundings, and other physical conditions.
  • NDMA has recommended use of Synthetic-Aperture Radar imagery to automatically detect changes in water bodies, including new lake formations, during the monsoon months. It has said methods and protocols could also be developed to allow remote monitoring of lake bodies from space.
  • To manage lakes structurally, the NDMA recommends reducing the volume of water with methods such as controlled breaching, pumping or siphoning out water, and making a tunnel through the moraine barrier or under an ice dam.

-Source: The Hindu


Sri Lanka ‘banking on’ $1 bn India swap deal

Context:

Sri Lanka is “banking on” a $1 billion currency swap from India to meet its debt repayment obligations in 2021 and tide over the current economic crisis, a senior official of the Central Bank of Sri Lanka said.

Relevance:

GS-II: International Relations (India’s Neighbors, Foreign Policies and Developments affecting India’s Interests), GS-III: Indian Economy

Dimensions of the Article:

  1. What is a Currency Swap?
  2. How a Currency Swap Works
  3. About Sri Lanka’s Current position on Debt servicing

What is a Currency Swap?

  • A currency swap is a transaction in which two parties exchange an equivalent amount of money with each other but in different currencies.
  • The parties are essentially loaning each other money and will repay the amounts at a specified date and exchange rate.
  • The purpose of a Currency Swap exercise could be to:
    1. Hedge exposure to exchange-rate risk,
    2. Speculate on the direction of a currency, or
    3. Reduce the cost of borrowing in a foreign currency.

How a Currency Swap Works

In a currency swap, or FX swap, the counter-parties exchange given amounts in the two currencies.

Example for Understanding Currency Swap between 2 countries

  • During a Currency Swap deal, say the U.S. might receive 100 million British pounds (GBP), while the U.K. receives $125 million. This implies a GBP/USD exchange rate of 1.25.
  • At the end of the agreement, they will swap again at either the original exchange rate or another pre-agreed rate, closing out the deal.
  • Central banks and Governments engage in currency swaps with foreign counterparts to meet short term foreign exchange liquidity requirements or to ensure adequate foreign currency to avoid Balance of Payments (BOP) crisis till longer arrangements can be made.
  • These swap operations carry no exchange rate or other market risks as transaction terms are set in advance.

Click Here to read about India – Sri Lanka debt relations and Sri Lanka’s Approach to India for Currency Swaps

About Sri Lanka’s Current position on Debt servicing

  • For Sri Lanka, Currency Swap is cheaper than borrowing from the market, and a lifeline as it struggles to maintain adequate forex reserves even as repayment of its external debts looms.
  • Sri Lanka has already serviced part of its debt in 2021 and is preparing to repay the remaining more than $3 billion debt by the end of 2021.
  • With an international sovereign bond maturing soon, a $1 billion repayment is due in July.
  • Sri Lanka is expecting a $400 million swap from the Reserve Bank of India in a couple of months through the SAARC facility but the additional $1 billion is going to be crucial for Sri Lanka.
  • While official sources in New Delhi earlier indicated that negotiations on the issue were “ongoing”, the Indian government is yet to respond to requests of currency swap as well as the 2020 request for a debt freeze, even as bilateral talks have continued at high levels.
  • Sri Lanka’s gross official reserves currently stand at $4 billion, excluding the “standby” about $1.5 billion swap agreement with the People’s Bank of China.
  • There is also the Currency Swap deal with Bangladesh that is effectively a loan that Bangladesh will give to Sri Lanka in dollars, with an agreement that the debt will be repaid with interest in Sri Lankan rupees.

-Source: The Hindu

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