Bangladesh approves currency swap facility to Sri Lanka
Part of: GS Prelims and GS-II – International Relations & GS-III – Economy
In news
Bangladesh’s central bank has approved a $200 million currency swap facility to Sri Lanka.
It will help Sri Lanka in its foreign exchange crisis.
Key takeaways
A currency swap is effectively a loan that Bangladesh will give to Sri Lanka in dollars, with an agreement that the debt will be repaid with interest in Sri Lankan rupees.
For Sri Lanka, this is cheaper than borrowing from the market.
The period of the currency swap will be specified in the agreement.
This may be the first time that Bangladesh is extending a helping hand to another country.
It is also the first time that Sri Lanka is borrowing from a SAARC country other than India.
Sri Lanka didn’t approach India because
India-Sri Lanka relations have been tense over Sri Lanka’s decision to cancel a valued container terminal project at Colombo Port.
