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Money, Capital Market and State Enterprise Reforms State Minister Ajith Nivard Cabraal
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Money, Capital Market and State Enterprise Reforms State Minister Ajith Nivard Cabraal on Friday defended the $ 250 million currency swap with Bangladesh, implying it wasn’t a disgrace for Sri Lanka to enter into such an arrangement.
“It is necessary for us to understand that there are investments and loans, both refer in most instances to the same thing (factor),” he said, responding to a question during a webinar titled ‘The Colombo Port City: Angel or Devil?’ on 28 May.
On 25 May, the Bangladesh Bank approved a $ 250 million deal – its first currency swap – after Sri Lanka appealed for help to shore up its foreign reserves and ease pressure on the exchange rate.
“Bangladesh is loaning more money to the US than to anybody else, the same way Sri Lanka is,” Cabraal defended.
“When Sri Lanka loans money to the US or any other advanced country in the European Union, we call it an investment. The only thing (difference) when you give it to a so-called third world country, is a loan — that is the only difference,” he said.
Bangladesh has built up $ 45 billion in reserves in recent years on the back of impressive garment exports and record remittances by its 10 million overseas workers. However, Sri Lanka’s GDP per capita of $ 3,852 is more than double that of Bangladesh, according to the latest World Bank data.
The State Minister pointed out that a purchase of a US Treasury bill or a bond was actually a loan given to the US at a very low price — a point the people missed quite often.
“It is only at the time of where the investment is made that the norm slightly changes. If it is an investment in Sri Lanka it will be called a loan, but if it is an investment in an advanced country you will call it an investment— that is the difference,” Cabraal explained.
Bangladesh is the third country to join followed by China and South Korea by approving a currency swap to bail out Sri Lanka from the foreign exchange crisis. On 10 May, Sri Lanka secured a $ 500 million loan from South Korea, a month after a $ 1.5 billion Chinese currency swap, as the country battles a dollar shortage and debt crisis.
