Sri Lanka has a secured credit card issued by the Fed for $1 Billion

 

This is almost exactly like a secured credit card with a credit line of $1 billion and an interest rate on this credit card is 0.35%.  The expiration date is March 31, 2021, unless it is renewed, which it likely will be.

According to an official statement by the Central Bank of Sri Lanka (CBSL), “the CBSL has decided to pledge a sum of USD 1 billion worth of US Treasury Bonds held in the CBSL reserve and enter into the above type of Repo facility with the FED. This would permit the CBSL to raise USD 1 billion in cash form when required. When this Repo facility is settled by the CBSL, there will be no change in the CBSL Reserve position as the FED would release the pledged bonds back to the CBSL. The cost to the CBSL would be the applicable Repo fee, which is about 0.35 per cent per annum.”

https://wallstreetonparade.com/2020/08/the-fed-created-an-emergency-lending-program-to-hold-interest-rates-down-the-tiny-country-of-sri-lanka-was-the-major-user/

So, Sri Lanka owns $1 billion of Treasury bonds that the Fed has custody of.  Why doesn't Sri Lanka just sell the bonds if it needs the cash?  Well, Sri Lanka doesn't want to make a change in its long-term investment portfolio.  Selling and buying bonds would have certain transaction costs which it wants to avoid.  It just has a need for short-term cash now.

Why would the Fed issue the repo loan?  Well, it wants to keep interest rates down, and if Sri Lanka sold the bonds it would put upward pressure on interest rates, even if it is by a very small amount.

The Fed is the world lender of last resort, and this is an example of it.