The Central Bank of Bangladesh will lend US$50 million to Sri Lanka this week as part of Bangladesh’s efforts to support the Island nation suffering from a foreign exchange crisis, the Daily Star reported.
The credit will be given under the currency swap agreement inked by the Bangladesh Bank (BB) and the Central Bank of Sri Lanka (CBSL) on August 3. The Daily Star reported that this is the first-ever loan to any country from Bangladesh.
“As per the deal, the BB will provide a total of $250 million to help prop up the island nation’s fast-depleting foreign reserves and ease pressure on its exchange rate. The financing will be given in three phases. The first tranche of the loan will be given this week, according to a top official of the central bank. The remaining two tranches will involve $100 million each.
“Seeking anonymity, the BB official said the central bank would give the first tranche for three months. If the CBSL fails to repay the loan within the deadline, it will get three more months to repay. If it fails to pay back again, it will be given three more months. The CBSL will return the amount in three months at the interest rate of the London Interbank Offered Rate (Libor) plus 2 percent. If it can’t honour the deadline, the interest rate will not change.
“But if the tenure goes up to six months, the interest rate will be Libor plus 2.5 per cent. The Libor is the global reference rate for unsecured short-term borrowing in the interbank market and acts as a benchmark for short-term interest rates. This week, the three-month Libor is 0.14 per cent and the six-month Libor is 0.18 per cent. If the CBSL fails to return the money, the Sri Lankan government will pay back the loan as per the state guarantee attached in the agreement, the BB official said, adding the outstanding balance limit will never exceed $200 million. He said Bangladesh was not extending the loan for any commercial purpose,” newspaper report added.
- THE DAILY STAR
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