Document Type

Case Study

Case Series

Central Bank Swap Lines


In response to the Global Financial Crisis (GFC), finance ministers of member countries of the South Asian Association for Regional Cooperation (SAARC) agreed in 2009 on the need for bilateral arrangements to tackle short-term credit contractions and financial market disruptions. In 2012, the Reserve Bank of India (RBI) responded by launching a self-funded USD 2 billion swap framework for all SAARC member nations to provide a backstop line of credit to fight liquidity crises. The framework defined the terms under which a borrowing central bank could enter into a bilateral agreement with the RBI. Bhutan, Maldives, and Sri Lanka used the RBI’s SAARC swap framework to sign and activate bilateral swaps at various points between 2012 and 2022, including during the COVID-19 pandemic, to meet dollar liquidity needs. These countries may have preferred SAARC to other multilateral liquidity facilities because of its lack of conditionality and quick disbursal of funds. The SAARC framework helped borrowing central banks maintain exchange rate stability, provide short-term foreign exchange liquidity, and facilitate downstream lending programs. It was set to expire in November 2022 but is likely valid for another three years, given Bhutan’s latest swap agreement in December 2022.