South Asia urged to push lenders for payment relief

South Asia should push international lenders for a year's halt on payments and create a network of currency swaps to help weather the global crisis, Sri Lanka's president told a regional bloc on Friday.
President Mahinda Rajapaksa, who chairs the South Asian Association for Regional Cooperation (SAARC), also urged a meeting of its foreign ministers to boost efforts to counter terrorism in a region beset by unrest and poverty.
"The instability caused by this crisis can be considered quite similar to the threat caused by terrorism to our societies and our region," he said.
SAARC represents roughly a fifth of the world's population, but has rarely risen above squabbles over a free trade agreement and has been hobbled by regional rivalries, particularly those between India and Pakistan.
Neither nation sent their foreign ministers to the two-day meeting. Sri Lanka, Bangladesh, Afghanistan, Bhutan, the Maldives and Nepal round out the rest of the group formed 23 years ago to boost economic cooperation.
Rajapaksa said the bloc should push multilateral and interational lenders for standstill arrangements on debts for at least a year "so that developmental initiatives ... will not have to be abruptly stopped".
"Such arrangements could also be flexible enough so that at the end of one year, these could be reviewed and extended if the global financial crisis would still exist," Rajapaksa said.
That issue is close to home for the Indian Ocean island nation, which saw its rupee currency hit an all-time low on Friday amid low foreign exchange reserves that prompted Fitch to cut its outlook to negative. [ID:nHKG210950]
To help bolster reserves, Sri Lanka has already entered into a currency swap deal worth $200 million with one country it will not name, and the central bank says it is in advanced discussions with two other nations.
Rajapaksa said a similar regional iniative would be a tonic to soothe the trickle-down effects of the crisis, as the ASEAN bloc has successfully implemented.
"I am reminded of the success in our adjacent region, East Asia, which during the East Asian financial crisis, created a network of bilateral swap arrangements and has now created a reserve fund to address liquidity problems," Rajapaksa said.
Full economic cooperation has long eluded SAARC, despite signing a free trade deal in 2006 that has yet to show any real benefits.
Intra-SAARC trade is just over 5 percent of South Asia's total trade, compared to 26 percent seen among ASEAN countries and 55 percent among EU members.
Sri Lanka is halfway through its one-year chairmanship, after an August summit in Colombo at which leaders signed a pact to combat terrorism and to create a food bank to fight hunger amid then-rising food prices.