Delhi shelves deal

Shakhawat Hossain  

New Delhi has shelved a proposal on currency swap among the countries of South Asian Association for Regional Cooperation, sources at Bangladesh Bank said.

The government of India is yet to endorse the proposed framework on currency swap as agreed by the central bank governors of the SAARC nations at a meeting in Washington last September.

India had also agreed to contribute initial investment of US$ 2 billion to get the currency swap scheme operational.

Officials of the Reserve Bank of India informed the BB officials that the document was still under consideration of the government of India for approval until last month, said the BB officials.

The currency swap deal among the SAARC countries was first recommended at 16th SAARC Summit in Bhutan in 2010 to tackle short term liquidity crisis of foreign currencies.

The deal would make import payments of the SAARC countries a lot easier as a member countries could exchange their currencies with other member countries struggling with inflation, poverty, inequality and employment.

At present, the US dollar is used for the purpose of imports and the exports.

The proposed deal is expected to be highlighted in the upcoming meeting of the finance ministers of the SAARC countries in Dhaka.

The ministry of finance officials who are organising the two-day event on January 29-30 said the issue has already been included in the agenda along with reduction of sensitive lists and ways to boost investments in SAARC countries. 

Dhaka is optimistic about a positive outcome on the currency swap as it is facing shortage of foreign currency due to growing import payments.

Bangladesh’s annual import payments to India stood at more than $4 billion. It would be a relief for the BB if the payment can be paid in local currency.

Earlier, BB had sought opinions of the different ministries and divisions on the currency swap. The finance ministry welcome the move and suggested that the interest rate should be around 2 per cent.

The BB officials pointed out that most of the Asian countries were less vulnerable than many countries in Europe and America during the global economic crisis in 2009 because of good financial system.

Several currency swap agreements were signed in 2000 among East Asian countries for tackling financial risks.

New Delhi last month struck a $15 billion currency swap deal with Tokyo. It was an expansion of a $3 billion accord that expired earlier this year.