Bangladesh extends validity of $ 200Mn credit facility by three months

COLOMBO (News 1st); The Bangladesh Bank (BB) has extended validity of the credit facility it extended to Sri Lanka by three months after the expiry of the first three-month tenure of the credit facility, the New Age reports, citing a senior official of the Bangladesh Bank.

The New Age further reports that the loan facility has been renewed following a request from the Sri Lanka itself. 

Previously, Bangladesh extended the credit facility amounting to $200 million under a currency swap deal with Sri Lanka, and the country received the loan facility from Bangladesh in three tranches.

The BB released $50 million as the first tranche under a currency swap deal to support Sri Lanka on 19th August, 2021.

The second tranche amounting to $100 million was released on 30th August, 2021 and the final instalment worth $50 million was released on 21st September, 2021.

As per the agreement, Bangladesh would receive 2 per cent plus LIBOR (London Inter-Bank Offered Rate) as interest on the credit amount.

If the instalment principal remains unpaid even after six months, the applicable interest would be 2.5 per cent plus LIBOR.

‘Our assessment is that the Sri Lanka would use the fund for at least nine months,’ the BB official said to the New Age.

The currency swap initiative was taken after the Prime Minister Mahinda Rajapaksa’s visit to Bangladesh to join the celebrations of the golden jubilee of Bangladesh’s independence and received the BB’s approval in May.

Apart from receiving $200 million from Bangladesh, the island nation also received another $787 million from the International Monetary Fund’s special drawing rights (SDR) allocation.

However, Bangladesh’s reserve was on the rise after the COVID-19 outbreak whereas Sri Lanka’s reserve came under increasing pressure.

On Tuesday, Bangladesh’s foreign exchange reserve stood at $46.3 billion after hitting a record high of $48 billion from around $33 billion one and a half year ago.

In contrast, the reserve of Sri Lanka, which is facing a sharp trade deficit, declined to around $3 billion by the end of August 2021.