After Sri Lanka, the Bangladesh Bank will now lend $ 200 million to another country, the Maldives.
The President of the Maldives, Ibrahim Mohamed Solih, applied for the loan in March this year when he visited Bangladesh to join the celebrations of the centenary of the birth of the father of the nation Bangabandhu Sheikh Mujibur Rahman and the jubilee of independence of Bangladesh.
The Foreign Ministry discussed the proposal with senior officials of the Bank of Bangladesh.
Although no official proposal has yet been made by the Maldives, the central bank is favorable to the loan, according to a senior Bangladesh Bank official.
The Bangladesh Bank has the capacity to lend the amount, Governor Fazle Kabir said.
Although the reserve remains under pressure amid rising import spending, the governor views the loan to the Maldives as a proud moment for Bangladesh, which was once described as a hopeless case.
The Maldives, the tourism-centric country that has been hit hard by the pandemic due to travel bans, requested the loan for five years, according to the central bank source.
However, the central bank has not finalized the loan modality.
Earlier in July this year, the Bangladesh Bank first became a lender by providing a loan to Sri Lanka to support the liquidity of its debt-ridden economy.
The Bangladesh Bank has loaned a total of $ 200 million to the country under a currency swap deal.
Although Sri Lanka declared an economic emergency amid a severe shortage of foreign reserves, it had regularly served interest on the Bangladesh loan.
Sri Lanka got the loan for one year with quarterly renewals.
Sri Lanka’s foreign reserve continued to deteriorate, forcing the country to recently announce an economic emergency.
After paying off a billion-dollar debt in July from its reserves, the Sri Lankan government had only enough dollars to cover less than two months of imports.
The escalating crisis in Sri Lanka put Bangladesh at risk of recovering its loan.
In this situation, the Bangladesh Bank will give the green light to a loan to the Maldives.
Lending to both Sri Lanka and the Maldives is a political decision, central bankers have said.
The high foreign exchange reserves prompted the central bank to make a high-risk investment, a senior bank official said.
Moreover, the loan amount is very insignificant as the Bangladesh Bank usually sells over $ 200 million to any state bank in a single day, he said.
The country’s foreign exchange reserve stood at nearly $ 45 billion on November 24 after hitting the $ 48 billion mark in August, according to data from the Bangladesh Bank.
The enormous selling pressure of dollars to keep exchange rates stable has eroded foreign exchange reserves.
The Bangladesh Bank has sold about $ 2.1 billion to commercial banks since August.
Import spending jumped 52% in the July-October period of the current fiscal year, while growth was negative during the pandemic period.