Staff Reporter :
Sri Lanka got one more year to repay $200 million taken as loan from Bangladesh Bank (BB) as the island nation is experiencing its worst financial crisis in more than 70 years.
The decision was taken at a board meeting of BB on Sunday. The meeting was chaired by Governor Dr Fazle Kabir. BB directors Deputy Governors and Executive Directors of the concerned departments were attended the meeting among others.
Earlier, the Lankan government sought more time to return the loan amount as the country’s economic crisis worsened and thousands have recently taken to the streets in massive protests across the country demanding the president’s resignation.
Crisis-hit Sri Lanka took short-term loans from India and China also.
On April 13, Sri Lanka announced defaulting on its entire $51 billion of external debt until a bailout from the International Monetary Fund comes through. The assistance from the IMF is yet to be worked out.
Officials said the cash-strapped Sri Lanka got the fund under the bilateral currency swap agreement between Bangladesh Bank and Central Bank of Sri Lanka. The fund was released in three phases in favour of the country.
In June 2021, Bangladesh loaned Sri Lanka $200m and in December it renewed the credit facility. As per the agreement with Sri Lanka, Bangladesh was supposed to receive an interest payment of Libor + 2% if the amount was returned in three months.
In January this year, Sri Lanka appealed to China to reschedule its debt. In February, it borrowed $500m from India to buy oil. On March 18, India gave Sri Lanka a $1bn line of credit to pay for essentials such as food and medicine.
As of February, Sri Lanka had $2.31bn only in its foreign exchange reserves, according to its central bank. With debt payments of about $7bn due in 2022 – including $1bn in international sovereign bonds (ISB) maturing in July – Sri Lanka may find itself with no usable reserves.
At $12.55bn, ISBs make up the largest share of Sri Lanka’s foreign debt, with the Asian Development Bank, Japan and China among the major lenders.
The International Monetary Fund (IMF) said, public debt has hit “unsustainable levels” and foreign exchange reserves are insufficient for near-term debt payments.
