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Bangladesh extends currency swap option to boost Lanka's depleting reserves

In May 2021, Bangladesh cleared a $200 mn currency swap facility for Sri Lanka, to help boost its economy, becoming 1st South Asian country to extend crucial financial assistance to Colombo this year

Bangladesh | currency swap | sri lanka

Press Trust of India  |  Colombo 

Bangladesh PM Sheikh Hasina | Wikimedia Commons
Bangladesh PM Sheikh Hasina | Wikimedia Commons

In a friendly gesture, has extended the term of the USD 200 million loans given to cash-strapped under a deal by one more year to boost the island-nation's depleting foreign reserves.

In May 2021, cleared a USD 200 million facility for Sri Lanka, to help boost its economy, becoming the first South Asian country to extend crucial financial assistance to Colombo this year.

Bank directors took the decision on Sunday, keeping the conditions for the loan unchanged, said the central bank's spokesman Serajul Islam, Hiru News reported.

was supposed to repay within three months, but the term was extended several times at Sri Lanka's request as the country's began to deepen.

With Sri Lanka's main foreign exchange earning sector, tourism, badly hit due to the pandemic, the country has been struggling to maintain its reserves.

The in is caused in part by a lack of foreign currency, which has meant that the country cannot afford to pay for imports of staple foods and fuel, leading to acute shortages and very high prices.

Sri Lanka's foreign reserves dropped sharply from a healthy level of USD 8,864 million in June 2019 to USD 2,361 million in January 2022, according to official estimates.

Thousands of demonstrators have hit the streets across Sri Lanka since April 9, as the government ran out of money for vital imports; prices of essential commodities have skyrocketed and there are acute shortages in fuel, medicines and electricity supplies.

The island nation's economy is in crisis now, with usable foreign reserves down to USD 50 million.

A is a transaction in which two parties exchange an equivalent amount of money with each other but in different currencies. It helps in reducing the cost of borrowing in a foreign currency at favourable rates.

India has committed more than USD 3 billion to debt-ridden Sri Lanka in loans, credit lines and credit swaps since January this year.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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First Published: Mon, May 09 2022. 14:20 IST