Currency Swap between Bangladesh and Sri Lanka

On 26th May, 2021, Bangladesh Bank, Bangladesh’s central bank approved a $200 million currency swap agreement with Sri Lanka, which will help Colombo tide over its foreign exchange crisis.

Key Points

  • Sri Lanka, staring at an external debt repayment schedule of $4.05 million in 2021 is in urgent need of foreign exchange.
  • 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, and a lifeline as it struggles ....
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