Home ›› 02 Jan 2023 ›› Front
Bangladesh Bank (BB) has launched another Tk 10,000 crore fund for export-oriented industries to help them with the procurement of raw materials from local and foreign sources, in addition to the $7 billion Export Development Fund (EDF).
The new fund can be used by exporters to import raw materials to manufacture products and export them.
Borrowers can take loans from this fund, called Export Facilitation Pre-finance Fund (EFPF), against up to 4 per cent interest for six months. However, loan tenure can be extended for three more months on a case-to-case basis.
The central bank issued a circular in this regard on the first day of the New Year. It said defaulters will not be able to take loans from EFPF.
Besides, if an exporter fails to repatriate export income after taking a loan from this fund, then they will not get any new benefits from EFPF.
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Faruque Hassan welcomed BB’s move while talking to The Business Post on Sunday.
He said, “This will help us survive amid the low export order period. Our millions of USD export payments are yet to be cleared and that’s why letters of credit (LCs) liabilities are rising. Now, exporters will able to clear LC payments with this fund.”
“As the fund is based on local currency, we will still have to purchase USD from the market and have to pay at least Tk 8 extra more than our selling rate. Considering the real scenario, the government must go for the unified exchange rate,” he added.
“Also, we want EDF to continue and the EFPF fund should not be its alternative. EDF is directly supporting to increase the country’s export earnings,” he said.
Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Executive President Mohammad Hatem thanked the central bank for introducing EFPF amid the crisis. “However, we have learned that EFPF is EDF’s alternative.
“If BB reduces EDF, they will have to increase EFPF’s size and ensure a unified exchange rate,” he said echoing Faruque’s concern about the existing exchange rate.
Not an alternative
According to industry insiders, due to the dollar crisis and low loan recovery rate from EDF the fund, policymakers are trying to discourage people from taking a loan from this fund. To that end, the central bank has also increased the EDF loan interest rate to 4 per cent, which came into effect on November 13 last year.
BB spokesperson Mezbaul Haque, however, stressed that EFPF is not an alternative to EDF and assured that EDF will not be shut down.
“This new facility is not a replacement for EDF, but a new window for exporters. They will be able to take a loan from EDF as well as the new fund in local currency,” he said.
He added that exporters need to collect locally-made raw materials for manufacturing purposes and EFPF has been created for this. “They can take loans in taka from the fund. They will also be able to take a loan in foreign currency from this fund if necessary.”
The EDF was formed in 1989 to provide low-interest loans in foreign currency to continue the development and expansion of export-oriented industries. At that time, the fund size was about $39 million. Currently, the size of EDF has increased to $7 billion.
The loan taken from EDF has to be repaid in 270 days and during that time, that amount of dollars cannot be counted as part of the foreign exchange reserve.
Many exporters who borrowed have failed to repay on time, which converted their loans to forced loans. They took advantage of this opportunity and paid the loan back in taka. But this led BB to issue a circular saying a loan from EDF cannot be converted into a forced loan.
Currently, the forex reserve is at $33.83 billion. But according to IMF’s calculation, $1 billion including EDF’s $7 billion should be deducted from this. In that context, the usable reserve amount stands at $25.83 billion.
Who can get the loan?
Members of BGMEA, BKMEA, Bangladesh Textile Mills Association and Type-B and Type-C industries of Export Processing Zones will be able to get loans from EFPF, equal to the cost of the raw materials for production or the highest Tk 200 crore.
The member companies of the Bangladesh Dyed Yarn Exporters Association (BDYEA) will not get a loan facility of more than Tk 150 crore for supplying yarn.
The members of the Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association will not get more than Tk 20 crore in loans.
Members of the Bangladesh Plastic Good Manufacturers and Exporters Association will not get a loan of over Tk 10 crore.
Members of the Leather Goods and Footwear Manufacturers and Exporters Association of Bangladesh and Bangladesh Ceramic Manufacturers and Exporters Association will not get a loan of over Tk 7 crore.
Except for the members of these organizations, the final exporters of any other sector will get the pre-financing facility up to a maximum of Tk 5 crore, according to the BB circular.
