Bangladesh has joined China and South Korea by approving a currency swap to bail out Sri Lanka, which is facing its worst foreign exchange crisis, officials said Wednesday.

The central bank of Bangladesh on Tuesday 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.

"The board of the Bangladesh Bank has decided in principle to lend $200-250 million from Bangladesh's reserves to Sri Lanka for three months," Mohammad Sirajul Islam, a spokesman for the country's central bank, told AFP.

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.

But Sri Lanka's GDP per capita of $3,852 is more than double that of Bangladesh, according to the latest World Bank data.

"The fact that Bangladesh is the one providing the dollars is a big ego booster," Ahsan H. Mansur, a former senior IMF official and current executive director of the Dhaka-based Policy Research Institute, told a local daily.

Two weeks ago, Sri Lanka secured a $500 million loan from South Korea, a month after a similar loan from China was issued, as the island battles a dollar shortage and debt crisis.

China's central bank also granted a $1.5 billion currency swap to finance imports from China in February as the rupee hit a record low of 202.73 to the dollar.

At the end of April Sri Lanka said its economy shrank 3.6 percent last year due to the Covid-19 pandemic, making it the worst downturn since independence from Britain in 1948.

Beijing-backed firm bags Sri Lanka's foreign highway contract
Colombo (AFP) May 25, 2021 - A state-backed Chinese firm has become the first foreign owner of a Sri Lankan highway, a boost for Beijing as it battles other regional powers for influence in the island nation.

The cabinet on Monday awarded China Harbour Engineering Company (CHEC) a contract to build a 17-kilometre (10.5-mile), four-lane highway in the capital Colombo.

CHEC was expected to finish construction in three years and run the highway for 15 years before transferring ownership back to Sri Lanka, cabinet spokesman and energy minister Udaya Gammanpila said Tuesday.

Officials involved with feasibility studies on the project said it could cost up to US$1 billion to build.

The decision came a week after the government conferred tax-free status to the Chinese-built "Colombo Port City" -- the largest single foreign investment in Sri Lanka.

Sri Lanka's main opposition party SJB said the highway project could worsen the battle for influence between Beijing and regional powers such as India and Japan.

"Starting with the ports, China's influence now moves inland," SJB legislator Harsha de Silva told AFP.

"From a geopolitical perspective, this shows Sri Lanka is moving to one side and that is being pro-China."

Sri Lanka last year scrapped a $1.5-billion, Japanese-funded light rail project, saying it was not a "cost-effective solution" for congested Colombo.

In March, the government offered a strategically located deep-sea port to India and Japan, a month after abruptly pulling out of an earlier agreement with Delhi and Tokyo to jointly develop another terminal next to a Chinese-run container jetty.

In December 2017, unable to repay a huge Chinese loan, Sri Lanka allowed China Merchants Port Holdings to take over the southern Hambantota port, which straddles the world's busiest east-west shipping route.

The deal, which gave the Chinese company a 99-year lease, raised fears about Beijing's use of "debt traps" to exert influence abroad.

India and the United States have also expressed concerns that a Chinese foothold at Hambantota could give Beijing a military advantage in the Indian Ocean.

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EU parliament blocks China investment deal over sanctions
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