Bangladesh joins China, South Korea in bailing out Sri Lanka

DHAKA - 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 Wednesday.

The central bank of Bangladesh on Tuesday approved a US$250 million 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 US$200-US$250 million from Bangladesh’s reserves to Sri Lanka for three months,” Mohammad Sirajul Islam, a spokesman for the country’s central bank, told AFP.

Bangladesh has built up US$45 billion 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 GDP per capita of US$3 852 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 IMF official and current executive director of the Dhaka-based Policy Research Institute, told a local daily.

Two weeks ago, Sri Lanka secured a US$500 million 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 US$1.5 billion 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 percent last year due to the Covid-19 pandemic, making it the worst downturn since independence from Britain in 1948.