BANGLADESH has joined China and South Korea by approving a currency swap to bail out Sri Lanka, which is facing its worst foreign exchange crisis, officials said in Dhaka on Wednesday (26).
The central bank of Bangladesh on Tuesday (25) approved a $250 million (£176m) deal – its first currency swap – after Sri Lanka appealed for help to shore up its foreign reserves and ease pressure on the exchange rate.
“The board of the Bangladesh Bank has decided in principle to lend $200m-250m (£141m-£176m) from Bangladesh’s reserves to Sri Lanka for three months,” Mohammad Sirajul Islam, a spokesman for the country’s central bank, said.
Bangladesh has built up $45 billion (£31bn) in reserves in recent years on the back of impressive garment exports and record remittances by its 10 million overseas workers.
But Sri Lanka’s per capita GDP of $3,852 (£2,720) is more than double that of Bangladesh, according to the latest World Bank data.
“The fact that Bangladesh is the one providing the dollars is a big ego-booster,” Ahsan H Mansur, a former senior International Monetary Fund (IMF) official and current executive director of the Dhaka-based Policy Research Institute, said.
Two weeks ago, Sri Lanka secured a $500m (£353m) loan from South Korea, a month after a similar loan from China was issued, as the island battles a dollar shortage and debt crisis.
China’s central bank also granted a $1.5bn (£1bn) currency swap to finance imports from China in February as the rupee hit a record low of 202.73 to the dollar.
At the end of April, Sri Lanka said its economy shrank 3.6 per cent last year due to the Covid-19 pandemic, making it the worst downturn since independence from Britain in 1948.