Sri Lanka economic crisis: Bangladesh extends currency swap facility to boost the island nation's depleting foreign reserves

Colombo: In a friendly gesture, Bangladesh has extended the term of the USD 200 million loans given to cash-strapped Sri Lanka under a currency swap deal by one more year to boost the island-nation’s depleting foreign reserves. In May 2021, Bangladesh cleared a USD 200 million currency swap facility for Sri Lanka, to help boost its economy, becoming the first South Asian country to extend crucial financial assistance to Colombo this year. Bangladesh 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. Sri Lanka was supposed to repay within three months, but the term was extended several times at Sri Lanka’s request as the country’s economic crisis 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 economic crisis in Sri Lanka 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 9 April, 2022, 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 currency swap 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. Read all the Latest News , Trending News ,  Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.