Financial aid to Sri Lanka: Bangladesh’s economic boom hailed by Indian media
Indian media last week applauded Bangladesh’s currency exchange with Sri Lanka, claiming that Dhaka had started showing its economic boom and forging closer ties with its neighbors.
The $ 200 million currency swap is part of a larger $ 500 million currency swap program. In this context, a currency swap is actually a loan that Bangladesh grants Sri Lanka in dollars, under an agreement whereby the debt will be repaid with interest in Sri Lankan rupees.
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Indian Express, an online newspaper, explained that Bangladesh’s unlikely participation in the currency swap is a result of its economy growing. Bangladesh’s economy has grown over the past two decades – 5.2% in 2020 – becoming the fastest growing economy in South Asia. Bangladesh lifted millions of people out of poverty, surpassing India’s per capita income only recently, Indian Express reported.
The Hindu wrote that the currency exchange took place as major currency-generating sectors in Sri Lanka are hit hard due to the pandemic. The country is struggling to maintain its reserves in the face of a debt repayment schedule. For example, in April 2021 Sri Lanka’s foreign exchange reserves stood at $ 4.5 billion, roughly the same amount Colombo has to pay this year in foreign loan repayments.
Sri Lankan President Gotabaya Rajapaksa requested a $ 1.1 billion currency swap during a phone conversation with Indian Prime Minister Narendra Modi in May 2020, but India has yet to approve the request, he added. Bangladesh approved and mobilized the funds in less than two months, bringing much-needed relief to Colombo.
In follow-up, Dhaka’s medical assistance in the fight against Covid-19 in India marks the rise of a new tiger in the Asian economy, online newspaper The Print said. Dhaka handed over 2,672 boxes of various antiviral drugs and Covid-19 protective gear to India on May 18. Previously, Dhaka had also sent 10,000 vials of Remdesivir on May 6.
Bangladesh’s economic boom and subsequent deepening of ties shouldn’t come as a surprise as it has continuously reaped the benefits of the European Union’s Generalized Preferences Program (GSP) and other trade preferences, said Prabir De , professor at the Research and Information System for Developing Countries (RIS). “It is through this continued support through the EU’s GSP scheme that Dhaka has been able to derive considerable income from strategic exports. In addition, Bangladesh also receives a good amount of remittances,” De said.
Bangladesh’s foreign exchange reserves reached $ 45 billion in 2021, up from around $ 9 billion in 2010, while remittances reached $ 200 billion. “Bangladesh is the new Royal Bengal tiger of Asia. They speak one language in all areas and have well-structured governance, ”De said. Bangladesh is now negotiating with major ASEAN countries while considering trade pacts and connectivity projects with some ASEAN countries. , he added.