The Indian media has applauded Bangladesh's currency swap with Sri Lanka this past week, claiming that Dhaka has started to showcase its economic rise and forge deeper ties with its neighbours.
The $200 million currency swap is part of a larger scheme of foreign exchange swaps amounting to $500 million. In this context, a currency swap is effectively a loan Bangladesh is providing to Sri Lanka in dollars, under an agreement that the debt will be repaid with interest in Sri Lankan rupees.
Indian Express, an online newspaper, explained that the unlikely participation of Bangladesh in the currency swap is a result of its growing economy. Bangladesh's economy expanded in the last two decades -- 5.2% in 2020 -- becoming the fastest growing economy in South Asia. Bangladesh pulled millions out of poverty, overtaking India's per capita income just recently, reported Indian Express.
The Hindu wrote that the currency swap came through as Sri Lanka's main foreign exchange earning sectors are badly hit due to the pandemic. The country has been struggling to maintain its reserves in the face of a debt repayment schedule. For instance, in April 2021, Sri Lanka's foreign reserves stood at $4.5 billion, about the same amount that Colombo has to settle this year in external loan repayments.
Sri Lankan President Gotabaya Rajapaksa requested a $1.1 billion currency swap during a telephone conversation with Indian Prime Minister Narendra Modi in May 2020, but India is yet to approve the request, it added. Bangladesh approved and mobilised the funds in under two months, providing much-needed relief for Colombo.
In extension, Dhaka's medical assistance to India's Covid-19 fight marks the rise of a new tiger in the Asian economy, said the online newspaper The Print. Dhaka handed over 2,672 boxes of various anti-viral drugs and Covid-19 protection gears to India on May 18. Before that, Dhaka had also sent 10,000 vials of Remdesivir on May 6.
Bangladesh's economic rise, and its subsequent deepening of ties, should not come as a surprise since it has continuously reaped benefits from the European Union's Generalised Scheme of Preferences (GSP) programme and other trade preferences, said Prabir De, Professor at the Research and Information System for Developing Countries (RIS). "It is due to this continuous support through the EU's GSP scheme that Dhaka has been able to earn considerable revenues from strategic exports. Besides, Bangladesh does receive a good amount of remittances as well, De said.
Bangladesh's foreign reserves have reached $45 billion in 2021 from around $9 billion in 2010, while inward remittances reached $200 billion. "Bangladesh is the new Royal Bengal Tiger of Asia. They speak in one language across all spectrum and have well-structured governance," said De. Bangladesh is now trading with major ASEAN countries while looking at trade pacts and connectivity projects with some ASEAN countries, he added.