Bangladesh was debt-ridden a few years ago but is now a success in debt relief. It has given loans to Sri Lanka and Sudan. It gave a loan to a country for the first time by giving the first installment of the loan promised to Sri Lanka in August. Once upon a time, Bangladesh was referred to as a “bottomless basket”, a donation seeker in the international arena. Now it is a lending country. Bangladesh establishes an example in South Asia of how to ensure economic growth amidst various socio-political aspects.
Overcoming various adversities, Bangladesh today is a confident and promising country. Today, it has risen to the top of every index of the economy. When the ongoing 10 mega projects are completed, the trend of economic growth of the country and prosperity will increase.
The economy of the South Asian island nation of Sri Lanka is under a lot of pressure at the moment due to the wounds of the civil war and additional foreign loans for development projects. At present, the country’s foreign exchange reserves have come down to $4 billion. Meanwhile, in the midst of the epidemic, Bangladesh’s foreign exchange reserves have reached a milestone of over $45 billion.
The Prime Minister of Sri Lanka was accompanied by the Governor of the Central Bank of Sri Lanka in Dhaka last March to attend the birth centenary celebrations of Sheikh Mujibur Rahman. At that time, they made a proposal to Prime Minister Sheikh Hasina in this regard. After the Prime Minister agreed to the proposal, the Sri Lankan government sent a formal proposal to the Central Bank. In May, the Board of Directors of Bangladesh Bank approved in principle a loan of $250 million to Sri Lanka under the currency swap.
Bangladesh Bank released $50 million in the first installment on August 16 based on Sri Lanka’s demand. Bangladesh entered the list of lender countries by waiving that loan and on the second installment of $100 million was released in June 2021. This money is being given from the foreign exchange reserve of Bangladesh Bank.
Reserves are above $46 billion after a $100 million discount in favor of Sri Lanka in June. With the current foreign exchange reserves of Bangladesh, it is possible to meet the import cost for more than eight months. Bangladesh ranks second among South Asian countries in terms of foreign exchange reserves.
Sri Lanka has been suffering from a foreign exchange reserve crisis in recent times. At that time, it had only $500 million in foreign exchange reserves. With this reserve, it was not possible to meet its import expenses for three months. In order to keep the reserves risk-free, at least three months of import expenditure has to be kept equal.
For the first time in 50 years of independence, Bangladesh gave a loan to a country for the development of the country and to meet various needs.
In the last decade, Bangladesh has gained this ability to lend due to the huge economic development, increase in exports and increase in expatriate income as the country’s foreign exchange reserves have swelled. Economists hope that this will change the image of the country.
Sudan, an African country, is unable to repay a loan from the International Monetary Fund (IMF). Bangladesh has taken the responsibility of repaying that loan.
This information has been highlighted in a notification of the Ministry of Finance on June 16, 2021. Earlier, Bangladesh had given similar benefits to Somalia, another African country.
Sudan’s external debt skyrocketed to nearly $50 billion at the end of 2019. It is known that the IMF will get $6 billion US dollars from Sudan. When the IMF called on all its members to stand by the country in repaying the debt, almost everyone responded. As a friendly country, Bangladesh also agreed to cooperate with Sudan. In response to the IMF’s call, Bangladesh on granted Sudan a loan waiver of $650 million on June 15, 2021.
Bangladesh has begun to prove its economic potential in a very dramatic way. At one time, the country was very poor. US Secretary of State Henry Kissinger commented that Bangladesh is a “bottomless basket”. After 50 years, the US media Bloomberg says that Bangladesh is now an address of surprising success. The country’s per capita income is now $2,500. It is ahead of India. At the moment, India’s per capita income is $2,116. Pakistan is far behind with a per capita income of $1,260.
Economists say that there are some reasons behind the economic success of Bangladesh. Exports, social progress and economic foresight are among them. There are three more reasons besides economic capability: sympathy, economic diplomacy and political will.
Last year, Bangladesh also handed $80 million to help Somalia combat poverty as part of the IMF initiative.
The image of Bangladesh and the respect for the people of this country has increased due to the assistance to Sri Lanka and Sudan from foreign exchange reserves.
Bangladesh being a lending country can be an example to other South Asian nations.
*The writer is a teacher and researcher with a Masters in International Relations. He is based in Bangladesh.
December 28, 2021
The viewpoints expressed by the authors do not necessarily reflect the opinions, viewpoints and editorial policies of Aequitas Review.
