During an economic crisis on a scale not seen before, events in Sri Lanka over the past YEAR have taken a dramatic turn. For many overseas Sri Lankans in particular, including me, it has led to months of uncertainty and fear for the wellbeing of family, friends, and neighbours who are facing growing instability, with food, fuel, medicine, and other basics running short. Bangladesh helped Sri Lanka, especially when the island nation was struggling through an unprecedented crisis.
By John Rozario
Bangladesh is the biggest friend of the island nation in times of crisis. Sri Lanka declared bankruptcy last year and defaulted on its $51 billion foreign loans for the first time since independence from Britain in 1948. Bangladesh has played a significant role in aiding the island nation over the last year to tide over the economic crisis.
Although Bangladesh faces a severe foreign reserve, Bangladesh has extended the loan repayment period of 200 million dollars to Sri Lanka, which is burdened by the pressure of foreign debt, by another 6 months. The loan taken in 2021 was supposed to start repayment by March of this year. But due to the economic crisis, the country failed to repay this loan. In view of such a situation, Bangladesh has extended the loan repayment period by another 6 months till September.
The Governor of Bangladesh Bank told this information at the Bangladesh office of the World Bank. He said, today there was a discussion with the Governor of the Central Bank of Sri Lanka. The governor of the country met me last October and they said they will pay the money owed to them by February or March. But they couldn’t do that. They again asked us for time and we gave them until next August and September. They have confirmed to me that they will pay us within this period. We have extended their time and will also get interest on this amount.
However, in October last year, the Governor of the Central Bank of Sri Lanka promised to repay the entire amount of 200 million or 200 million dollars borrowed from Bangladesh by March this year.
Sri Lanka’s economy is in shambles due to the Rajapakse family’s rampant corruption, looting and investment in massive infrastructure sectors without thinking about the long term. Added to this was the shock of Covid. Then in 2021, Bangladesh stood by Sri Lanka which was in extreme crisis. Sri Lanka was given a loan of 200 million dollars in three installments from the Central Bank Reserve. The repayment period is also fixed in accordance with the currency exchange policy. But after the declaration of bankruptcy, there is uncertainty about the repayment of the loan from Sri Lanka. However, after a bilateral meeting with the Governor of the Central Bank of Sri Lanka when he came to attend the annual meeting of the World Bank Group in Washington last October, he was assured of getting the loan back.
Last month, Sri Lanka received a massive $2.9 billion loan from the IMF. As a result, the country is now expected to be free of its other debt burden. The country has to pay off $7.1 billion in debt. Of this, only China will get $3 billion, Paris Club will get $2.4 billion and India will get $1.6 billion.
Sri Lankan President Ranil Wickremesinghe conveyed Sri Lanka’s gratitude to the Bangladesh government and Prime Minister Sheikh Hasina for the timely assistance as the country battles to rebuild its economy.
Foreign Minister AK Abdul Momen was in Sri Lanka as a guest for the country’s low-key 75th Independence Day celebrations, for which the guest list was filled up mostly by neighbouring countries at foreign ministry-level. The foreign minister later paid a courtesy call on President Wickremesinghe at the Presidential Secretariat. It was then that Wickremesinghe conveyed the Sri Lanka people’s gratitude to their neighbours in Bangladesh. In a friendly gesture, Bangladesh had extended a $200 million loan to cash-strapped Sri Lanka under a currency swap arrangement in 2021.
As the saying goes, a friend in danger is a true friend. Bangladesh’s $200 million credit extension is in direct contrast to Canada’s move. Bangladesh Bank’s (BB) board of directors has extended the repayment deadline for Sri Lanka’s USD 200 million loan by six months, according to an official of Sri Lanka’s central bank on condition of anonymity. In August 2021, Bangladesh Bank lent Sri Lanka first US$ 50 million and later another US$ 150 million. It was due to be paid by April 2022. Governor of CBSL Dr. Nandalal Werasinghe assured BB (Bangladesh Bank) Governor Abdur Rauf Talukder in October 2022 that the loan would be repaid on time. However, Sri Lanka’s foreign exchange crisis is still ongoing. So, BB has extended the deadline till September 2023.
While Bangladesh Bank’s foreign reserves are decreasing rapidly, its deadline has been extended. According to the data of Bangladesh Bank, Bangladesh’s reserves on January 11, 2023, were 32.52 billion US dollars. In contrast, it was 44.92 billion US dollars in the same period of 2022. Bangladesh has already sought loan assistance from several multilateral lenders, including the IMF.
Good to know here, Sri Lanka has strong friends. They are not like them, who do not think twice to dump Sri Lanka in its weak state. Sri Lanka has a lot to offer in its economic crisis. Yet obviously not all friends are on that list during times of scarcity.
There was Bangladesh’s potato aid to Sri Lanka in 2022: It was also Dhaka’s standing with Sri Lanka’s hour of need. Bangladesh sent emergency medical supplies worth $2.3 million to crisis-hit Sri Lanka as the island country faced the worst economic crisis since 1948, resulting in a shortage of food, fuel, and other essentials. At a token handover ceremony held in Dhaka, Bangladeshi Foreign Minister AK Abdul Momen and Health Minister Zahid Maleque handed over a few boxes of medicines to Sri Lankan High Commissioner to Bangladesh Sudharshan D.S. Seneviratne.
At the handover ceremony, Momen described the supply of 65 types of medicines and equipment as an expression of solidarity and friendship between the two countries as Dhaka and Colombo celebrate 50 years of their diplomatic relations. Bangladesh helps Sri Lanka steer the economic crisis.
While the Bangladeshi government took some bold decisions to help the country tide over its economic crisis, even the Bangladeshi public came forward to support Sri Lanka. Your real friends are tested when the bad time comes. Bangladesh has stood by Sri Lanka, a friend in need and a friend indeed. Bangladesh promptly responded to an announcement of providing aid through food and medical support. From a humanitarian perspective, the quick response of Bangladesh was lauded by many, nationally and internationally. Greatest humanitarian example: Bangladesh has already portrayed its image firmly as a humanitarian nation when it warmly welcomed about 1.1 million forcibly displaced Rohingya refugees from Myanmar. Despite many diplomatic efforts, the repatriation of Rohingya people has been lingering for quite a long. Besides, Bangladesh has been tracking an impressive record in development and growth since the last decade which will make it more capable of offering help to other nations in crisis. Thousands of more examples can be drawn where Bangladesh was among the fastest nations to stand beside others in terms of gravity, time extension to be provided by Bangladesh might be small in the scale of the required demand but its prompt response is surely praiseworthy.
John Rozario is based in Karnataka, India, and has completed a master’s degree from Jawaharlal Nehru University in International Relations. He is a researcher, Bangladesh studies, strategic and international affairs analyst He can be reached at johnrojariojnu@gmail.com.