BB working on alternatives to SWIFT for trade with Russia

Bangladesh’s trade with Russia may face some hiccups if the country’s (Russia) banks are kicked out of the SWIFT system.

The Society for Worldwide Interbank Financial Telecommunication, or SWIFT, is a Belgian cooperative society providing services related to the execution of financial transactions and payments between banks worldwide.

The Finance Ministry is considering approving a proposal of Bangladesh Bank (BB) using the ‘currency swap’ system with Russia to avert losses.

Experts and ministry officials said Bangladesh will not be affected widely as export trade with Russia is not so big and several alternative systems are being used in different countries. 

Meanwhile, the West imposed sanctions and banned some banks of Russia from using the SWIFT system to derail Russia’s trade and economic system in protest of the invasion of Ukraine. As part of this, the European Union (EU), France, Germany, Italy, the United Kingdom, Canada and the United States have agreed to exclude Russia from SWIFT.

If this is implemented, Russia’s banking transactions with many countries in the world will be problematic. Bangladesh will not be left out from the problem, experts said.

Because the SWIFT system is used for financial transactions from country to country, if Bangladesh can’t use this network to pay Russia for traded items, it will be difficult to carry on trading. Besides, investment will be hampered, they said.

Commerce Ministry officials said trade will be affected in the short run, and if the war situation lingers, Bangladesh will have to face its impact in the long run.

However, referring to the export statistics with Russia, they said the volume of export to Russia is not very big, so it would have little effect on the overall export earnings of Bangladesh.

According to the Export Promotion Bureau (EPB), in the fiscal year 2020-21, Bangladesh exported goods worth USD $ 665.3 million to Russia, the largest of which was in the readymade garments products.

Imports amounted to $ 466.7 million, most of which were food products. The payment for these products was made through the SWIFT payment system.

If this service is stopped now, trade between the two countries will be in trouble. However, as an alternative to SWIFT, there is a proposal to settle transactions between the two countries in a ‘currency swap’ system, said a senior official of the Ministry of Finance.

Bangladesh Bank (BB) is working to connect with such a system in a few months. The central bank has submitted a proposal of using the ‘currency swap’ system with the Russian Federation, he said.

If this can be implemented, there will not be much problem in banking transactions between Bangladesh and Russia, the official told UNB, maintaining anonymity as he is not permitted to talk to reporters.

Former BB governor Dr. Salehuddin Ahmed told UNB that there are several alternatives for transactions with the Russian Banks if the SWIFT system is banned for Russia, and Bangladesh will not be severely affected by this.

Giving examples, he said the currency swap is a better alternative which Iran has been using with many countries for several years now to avoid sanctions.

Besides, Bangladesh can pay the Russian central bank directly - that means using a different system which is used with Myanmar, he said.

The BB governor said the Asian Clearing Union (ACU) is also another system for import payment. In that system payments are made at three month-intervals. It can be introduced if Russia agrees to it.