Swap with Bangladesh is not an investment but a loan
The swap agreement with the Bangladesh’s Central Bank is the latest swap facility sought by the Government and the Central Bank of Sri Lanka in recent times. This 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 at maturity.
Ironically, this swap is reported as the first instance that Bangladesh is extending financial assistance to another country in its history. Being one of the most impoverished countries of the world receiving billions of dollars in aid, Bangladesh has not yet been viewed globally as a lender to other countries.
But its economy has achieved remarkable progress over the last two decades, and became the fastest growing South Asian country in 2020. Bangladesh, which was ridiculed as a “bottomless basket” by the US State Secretary, Henry Kissinger in 1971, today holds a large foreign reserve stock of $ 45 billion, 10 times of Sri Lanka’s reserves.