Bangladesh loan gave immense relief from socioeconomic pressures: Sri Lanka's central bank governor 

Sri Lanka has immensely benefited from financial support by the SAARC countries, particularly Bangladesh and India, said P Nandalal Weerasinghe, governor of Sri Lanka's central bank.

Speaking at the 14th round of the South Asia Economic Summit hosted by the Centre for Policy Dialogue (CPD) in the capital's Sheraton Dhaka hotel on Saturday (4 November), Weerasingha said the assistance extended in the wake of the crisis engulfing Sri Lanka provided immense relief.

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Bangladesh had provided a $200 million loan two years ago to Sri Lanka under a currency swap agreement and the country paid the last instalment of the loan in September.

Weerasingha, who led Sri Lanka out of bankruptcy and hyperinflation, said this type of financial cooperation can not only be a short-term buffer but can also be of a more long-term nature in the form of investment flows towards infrastructure gaps and even building of overall productive capacities.

The central bank governor who secured an A- grade in Global Finance magazine's Central Banker Report Cards 2023, also said several commendable initiatives are already in place, such as the SAARC Finance and the SAARC Public Debt Managers' Forum – which offer platforms for discussions in relation to financial flows and to facilitate overall congruence in policymaking.

He said intraregional trade among SAARC nations was crucial for promoting economic growth and reducing poverty in the region.

However, trade within SAARC has historically been limited due to various factors, including political tensions, restrictive tariffs and duties, import restraints, protracted customs requirements, and excessive documentation.

Intra-regional trade among SAARC countries was about $40 billion in 2022, which has seen steady growth over the years compared to $6 billion in 2003, he said.

Weerasingha also said the region possesses immense potential in terms of its large population, rich resource endowment, geographical location and even common cultural heritage and historical roots.

Having fallen afoul of Sri Lanka's Rajapaksa ruling family and fleeing in 2020, Nandalal Weerasinghe returned to the Central Bank of Sri Lanka and was promoted to governor in April 2022, the Finance magazine reported. 

The new governor hit the ground running, raising the policy rate by 700 basis points barely two months in. 

A $3 billion IMF bailout agreed upon in March stemmed the bleeding of the Sri Lankan economy. 

Within a month, inflation had been tamed from 25% in May to 6.3% in July. This marked a return to single digit inflation after 20-months of double-digit prints.

"Economic growth in the second half of 2023 will likely be supported by improved foreign exchange liquidity, looser monetary policy, and parliamentary agreement in early July on how to optimise domestic debt," wrote the authors of a July Asian Development Bank research note.

Weerasingha's role in the upturn was noted, gaining him the A- grade in the Central Banker Report Cards 2023 published in September this year.