Sri Lanka seeks $250m loan from Dhaka again

Cash-strapped, debt-ridden Sri Lanka once again sought $250 million to Bangladesh. The island nation, which is struggling with its foreign exchange crisis, had borrowed the same amount from Bangladesh through a currency swap in 2021 and Bangladesh began releasing the amount in August 2021.

Officials involved with the process said, Sri Lanka on December 11, 2021, in a letter to Bangladesh foreign ministry thanked Dhaka for lending them the amount mentioning that they require $250 million more as they were yet to overcome their financial hardship.

Officials at the foreign ministry said they had recommended the finance ministry to lend Sri Lanka $250 million afresh considering Bangladesh’s geopolitical relations, trade transactions and bilateral friendship with the country.

Their recommendation awaits a decision at the Ministry of Finance.

Alongside sending the letter to Bangladesh foreign ministry, Sri Lankan Prime Minister Mahinda Rajapaksa also talked to Bangladesh Foreign Minister AK Abdul Momen on December 12, 2021, and sought the loan amount through currency swap as a friendly nation. Failing to solve the foreign exchange crisis, Sri Lankan central bank Governor Weligamage Don Lakshman had to leave office last year.

Economic analysts, however, suggested the government to remain cautious in taking any decision in this regard.

Former Bangladesh Bank governor Atiur Rahman told The Business Post, “The government should be cautious in lending from the reserve as a warlike situation prevails in the world centring Ukraine situation.”

“Fuel prices shoot up under influence of the situation and are likely to increase further. It will also cause an increase in prices of LPG and some other commodities which will increase our import expenditure,” he said.

“The situation is no more the same as it was when Sri Lanka was given a loan for the first time. I don’t understand on what consideration the government is planning to lend again. At the end of January, the reserve stood at $44.95 billion. So, I would suggest considering the overall situation while taking any decision,” said Atiur.