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Bangladesh extends the repayment period of Sri Lanka’s $200 million Swap

By: Staff Writer

Colombo (LNW): Bangladesh has extended the repayment period of Sri Lanka’s $200 million loan by further six more months.

Earlier, the Sri Lankan central bank sought time from Bangladesh to make the first installment of the $200 million credit by March this year, hoping that it would be able to restructure its debt by then. However, the restructuring was not done, Dhaka Tribune reported.

Now, Sri Lanka is seeking six more months and its first installment will be payed by August this year and another installment by September, said Bangladesh Bank Governor Abdur Rouf Talukder.

He was speaking to a group of journalists after a meeting with P Nandalal Weerasinghe, governor of the central bank of Sri Lanka, at the 2023 Spring Meetings of the World Bank Group and the International Monetary Fund (IMF) in Washington on Friday.

The Sri Lankan governor confirmed that it would need no further extension, Talukder said.adding that when a loan repayment period is extended, it is not free of cost. It adds more interest.

Sri Lanka, facing its worst economic crisis in history, borrowed the fund from Bangladesh in May 2021.

Colombo could not start repaying the loan and announced its external debt default in April of 2022 amid a deepening crisis.The loan repayment period has been extended thrice.

As per the agreement with Sri Lanka, Bangladesh was supposed to receive an interest payment of Libor plus 2% if the amount was returned in three months.

The Libor, the acronym for London Inter-Bank Offered Rate, is a benchmark interest rate at which major global banks lend to one another in the international interbank market for short-term loans.

The three-month Libor averaged around 0.53% in 2021.Last month, Sri Lanka secured a $2.9 billion programme from the IMF to tackle its huge debt burden.

The country owes $7.1 billion to bilateral creditors, with $3 billion owed to China, followed by $2.4 billion to the Paris Club, and $1.6 billion to India,.

The government also needs to renegotiate more than $12 billion of debt in eurobonds with overseas private creditors, and $2.7 billion on other commercial loans.

Bangladesh has extended the term of the US$ 200 million loan that was provided to Sri Lanka under a currency swap by one year with effect from May 2022.

The US$ 200 million currency swap was extended by the Bangladesh Bank (BB) to Sri Lanka in 2021.

In December 2021, the Bangladesh Bank extended the validity of the credit facility provided to Sri Lanka by three months, after the expiry of the first three-month tenure of the credit facility.

In March 2022, Sri Lanka sought another US$ 250 million currency swap from Bangladesh.

The request for a US$ 250 million currency swap came on the back of the US$ 200 million currency swap that was extended by the Bangladesh Bank (BB) to Sri Lanka in 2021.

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