By: Staff Writer
Colombo (LNW): Sri Lanka has paid off US$ 50 million more to Bangladesh as the final installment of a US$ 200 million loan taken under a currency swap agreement two years ago, surprising the Bangladeshi authorities by sticking to its obligations, official sources aid.
Bangladesh was surprised over a quick repayment of a loan borrowed during a currency crisis, Bangladesh Prime Minister Sheikh Hasina has told Sri Lanka president Ranil Wickremesinghe, his office said in a statement recently.
Citing a senior Bangladesh Bank official, The Daily Star said the Sri Lankan government has also paid US$ 4.5 million as interest on the loan amount on Thursday (Sept. 21).
Sri Lanka repaid USD 100 million on September 02, 2023, and USD 50 million more on August 17, 2023.
The island nation paid back the loan as its embattled economy is heading towards recovery from its worst economic crisis just a year ago. Its inflation rocketed to 69.8 percent in September last year. In July, however, inflation stood at 6.3 percent.
On the other hand, Bangladesh is facing a foreign exchange crisis after its reserve dropped sharply in the past one and a half years owing to higher import bills compared to lower-than-expected remittance and export earnings.
The gross forex reserve came down to US$ 21.45 billion on September 21 in line with the International Monetary Fund’s calculation formula, Bangladesh Bank data showed.
Sri Lanka has repaid its lender, Bangladesh, the entire $200 million loan taken through a currency-exchange agreement called SWAP more than two years ago.
Amazingly, the island nation, which had been in dire financial and economic straits even months ago, also paid total interest amounting to over $25.537 million.
“Sri Lanka has paid its third and final instalment amounting to $51.044 million (principal plus interest) on Thursday night,” said a central banker of Bangladesh.
However, getting back the loan amount had become uncertain at a time when the island country had declared itself sovereign debt defaulter.
Sri Lanka sought extension several times to repay the amount to Bangladesh Bank.As the Lankan economy has started to turn around this year, it has been quick in its capacity to repay foreign debt.
The completion of this repayment was confirmed by BB spokesperson and executive director Md Mezbaul Haque.
As the currency swap deal was agreed in 2021, Sri Lanka was supposed to repay the amount within three months.
In May 2022, Bangladesh extended the term to repay to September 2023 and the interest rate was revised upward to LIBOR plus 2.5 per cent.The Central Bank of Sri Lanka has paid the interest amount with every instalment. When Bangladesh extended the loan, its forex reserve was in comfort zone, which now stands at $21.45 billion.