If the decision taken by the European Union (EU) to exclude Russian banks from “Society for Worldwide Interbank Financial Telecommunication” (SWIFT) is implemented, Bangladesh will face issues in financial transactions, and to avoid that circumstance, economists are urging to finalize the decision on alternative transaction deals with Russia.
Meanwhile, on February 28, the neutral country Switzerland joined hands with the EU and announced the imposition of all kinds of economic and other sanctions on Russia.
With that in mind, Bangladesh Bank (BB) and the Ministry of Finance are now thinking about choosing an alternative transition system for Russia.
“Those who are interested in the global political economy already know, Russia has long viewed the Swift system as unsafe due to its hostility from the West in world politics. That is why they have introduced 'SPFS' alternative transaction system with some countries,” AB Mirza Azizul Islam, economist and former finance adviser to a caretaker government told Dhaka Tribune.
SPFS (System for Transfer of Financial Messages) is a Russian equivalent of the Swift financial transfer system, developed by the central bank of Russia.
According to the investigation, for a long time Russia has been proposing to Bangladesh to join this alternative system of sending banking transaction messages SPFS.
Although the policymakers of Bangladesh have not been worried about this, the recent situation is forcing them to think anew and hurry.
An official from the Finance Ministry, who did not want to be named, told Dhaka Tribune: "What will happen if Swift shuts down? Discussions have been going on between Bangladesh Bank and the Ministry of Finance for the last few days. Two proposals were made in this regard. Russia has been proposing us to join their SPFS for a while, but as an alternative to Swift, we are considering another proposal for the settlement of transactions called the 'Currency Swap' system for the two countries. In this case a third currency will be used, and to decide which one it’ll be, we have to make a mutual decision with Russia."
According to BB sources, a decision was taken at the meeting of the board of directors of Bangladesh Bank to engage in alternative economic transactions with Russia through the “Currency Swap” system. The proposal was then sent to the Finance Ministry for consideration.
However, no decision has been informed to Bangladesh Bank so far.
Asked about the currency system, Zahid Hussain, a former lead economist of the World Bank's Dhaka office told earlier that: “If this system is introduced, the central bank of one country will open an account with the central bank of another country in reverse currency. Bangladesh Bank will have accounts in Russian currency and the central bank of Russia will have a Taka account. Additional debts for import, export and other trade settlement will be paid by one country to another in an internationally exchangeable third currency.”
“Now what will be the third currency? That will be decided by the two countries,” he added.
Although Ahsan H Mansur, executive director of the Policy Research Institute (PRI), did not think that Swift would be closed now, he advised policymakers to find an alternative transaction path as soon as possible.
He told Dhaka Tribune: “Many European countries are heavily dependent on Russia's energy, especially on a number of important pipelines. I think because of Russia's dependence on energy, European countries do not want to depart them from the international payment system Swift right now.”
“But if that happened, then the work of the nuclear power plant would be delayed. Besides, import and export of goods from Russia will also come to a halt. So we have come up with a plan very quickly,” he described.
Some products including garments are exported from Bangladesh to Russia.
On the other hand, Bangladesh imports various products including wheat and defense equipment from Russia.
According to BB and Export Promotion Bureau (EPB) data, in the seven months till January of the current Fiscal Year (FY), about $46 crore worth of goods have been exported from Bangladesh.
In the first three months till September of the FY22, goods worth $7.54 crore were imported.
Earlier, in FY21, Bangladesh exported various products worth $66.53 crore to Russia and at the same time, goods worth $46.67 crore were imported.
According to the sources, the Rooppur Nuclear Power Plant, Bangabandhu Satellite-2 and various projects under implementation will be more worrying for Bangladesh than the import-export due to the embargo.
The Society for Worldwide Interbank Financial Telecommunication or Swift is the mainstay of fast and secure international lending.
Swift is associated with 11,000 banks and financial institutions in the world in over 200 countries and territories.
