Sri Lanka pays $50m back to Bangladesh

Sri Lanka has successfully reimbursed $50 million to Bangladesh as a partial repayment of the $200 million loan extended by Bangladesh to the crisis-stricken nation two years ago.

Confirming this development on Monday, Mezbaul Haque, executive director and spokesperson of Bangladesh Bank, told The Business Post, "Sri Lanka fulfilled its commitment by making the first instalment payment of the loan on August 17. The amount was swiftly added to our foreign exchange reserves on the same day."

"Another instalment is slated for payment on August 30. The central bank is optimistic that Sri Lanka will honour its commitment to repay the entire loan within the current year," he added.

Back in 2021, Bangladesh Bank provided a $200 million loan to Sri Lanka, which was then grappling with financial challenges. This assistance was drawn from the foreign exchange reserves under a currency swap arrangement. The loan had an initial term of one year, which concluded in September of the following year.

Due to Sri Lanka's persisting economic turmoil, the nation requested extensions for the repayment period. Bangladesh accommodated this request, granting two phases of extensions—first, an additional six months until March of this year, and later another six-month extension until September.

Notably, Bangladesh's foreign exchange reserves reached a record high of $48 billion in August 2021.

To diversify these reserves, the government established the Bangladesh Infrastructure Development Fund (BIDF), aiming to annually invest $2 billion in various public development projects. During this period, Bangladesh decided to assist Sri Lanka, which was undergoing an economic crisis. A loan was thus extended from the foreign exchange reserves.

However, following the provision of the loan in 2022, Sri Lanka's economic condition worsened, ultimately leading to a collapse. Consequently, the financially distressed nation sought Bangladesh's cooperation in extending the one-year loan tenure. Responding to this request, Bangladesh granted an extension to the loan term.