(VIDEO) Why is Bangladesh’s currency swap important?

(VIDEO) Why is Bangladesh’s currency swap important?

Written by Staff Writer

29 May, 2021 | 9:51 pm

COLOMBO (News1st): The Bangladesh Bank, which is the central bank of Bangladesh recently approved in principle a 200 million US Dollar currency swap with the Central Bank of Sri Lanka.

What exactly is the significance of a bilateral currency swap and what is in it for Sri Lanka?


What is a currency swap between two countries?

A foreign currency swap is an agreement to exchange currency between two foreign parties. The agreement consists of swapping principal and interest payments on a loan made in one currency for principal and interest payments of a loan of equal value in another currency.

What is the arrangement between Sri Lanka and Bangladesh?

The Bangladesh Bank, which is the country’s central bank, in principle approved a $200 million currency swap agreement with Sri Lanka, to help our country boost its depleting foreign exchange reserves.

As at the end of March this year, a few days after marking its 50th anniversary of its independence from Pakistan in 1971, Bangladesh’s foreign reserves stood at 43.4 Billion US Dollars, approximately 11 times of Sri Lanka’s foreign reserves of 4 Billion US dollars reported during the same period.

This is the first time Bangladesh has extended a helping hand to another country, and also the first time that Sri Lanka is borrowing from a SAARC nation other than India.

Even amidst the COVID-19 pandemic, Bangladesh’s economy grew by 5.2% during the financial year of 2020,recording the highest GDP growth in the South Asian region. The country’s Gross Domestic Product last year was approximately 330 Billion US Dollars, four times Sri Lanka’s GDP of 81 Billion US Dollars.

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