Dhaka clears currency swap for Lanka

• Bangladesh approved a $ 200 million currency swap facility for Sri Lanka, becoming the first South Asian country to provide financial assistance to the island nation this year.
• Country's main foreign exchange earning regions tourism, clothing, and tea exports have been badly affected by the epidemic, causing the country to struggle to maintain its reserves in the face of a tough debt repayment schedule.

Currency Swap Arrangement

• It is an arrangement between two friendly countries to involve in trading in their own local currencies.
• As per the arrangements, both countries pay for import and export trade at the predetermined rates of exchange, without bringing in a third-country currency like the US Dollar.
• In such arrangements no third country currency is involved, thereby eliminating the need to worry about exchange variations.