The government has decided to take loan from its own incentive package fund of Tk 30,000 crore earmarked for the country's big industries and service sector amid coronavirus only to give the salaries of the workers of export-oriented industries.
The amount of salaries and allowance for local export-oriented industries for three months' will cross Tk7,500 crore which was earlier fixed at Tk 5,000 crore to pay to workers in export-oriented industries.
Around Tk 4,500 crore out of Tk 5,000 fund has been spent to pay two months' salary while Tk 2,903 crore more is required to pay the June salary.
As the government is no longer able to pay due to financial crisis, it has decided to pay the June salary from the fund of Tk 30,000 crore which is meant to help the big industries and services sector soften the blow of Covid-19.
An official of finance division not to be named said the government has no fund crisis at this time and we have received that enough funds from development partners and different countries to smooth out the effects of Covid-19.
He also said the division has asked the Bangladesh Bank to manage Tk 2,903 crore from incentive package and 7% percent will be paid later to the commercial banks in subsidies.
In the meantime, BB has also instructed 32 banks of the country to pay salaries and allowances of export-oriented firms. As a result, the limits allowed by banks to lend to large industrial and service sectors are suddenly declining. According to the new decision, export-oriented companies will be able to take loans at 9 percent interest to pay salaries and allowances. The government will provide a seven percent subsidy. Industry owners will have to pay two percent interest as before.
The previous incentive fund of Tk 5,000 crore was entirely government money. Banks could borrow money from that fund without interest. And there was an opportunity to collect up to two percent fee from the industry owners. And now June's salary will remain a bank deposit, which would go to other traders as a loan. Due to the large deficit in revenue collection, the government's funds have been strained. The government will have to pay more interest to subsidy now.
Banks have run into problems in the middle of the implementation of the incentive package due to the tightening of funds and new decisions. On condition of anonymity, the managing director of a bank said, “We were given a loan limit of Tk 900 crore. All the customers showed interest due to low interest. Now all of a sudden you have to pay Tk 90 crore from this limit. It will have to reduce the credit limit for all clients or exclude some.”
MD also said “The government has no enough funds. Therefore, the government has instructed the banks to pay salaries and allowances from the capital set aside for the affected big industries and service sector.”
It is learned that 32 banks had earlier taken Tk 5,000 crore from the government to lend salaries and allowances to export-oriented companies. The higher the bank lending for salaries and allowances, the lower the credit limit for that bank. Meanwhile, even after a week, it is still uncertain when the garment workers will get their June salary. Mohammad Hatem, vice-president of BKMEA, an association of knitwear owners, said there was a high risk of non-payment of wages on time. BB has given several conditions in the letter sent to the banks. For example, the term of the loan will be 2 years, after the first 6 months, the loan will have to be repaid in 18 monthly installments. All salaries and allowances will go through the Mobile Financial Services (MFS).
In the second week of March, leaders of the RMG sector have been expressing concern over the cancellation or suspension of a 3.17 billion US dollar garment purchase due to Covid-19. Then on March 25, Prime Minister Sheikh Hasina announced an incentive fund of Tk 5,000 crore for export-oriented industries. However, even after getting loans on easy terms, layoffs in the sector continued on the pretext of cancellation and suspension of the purchase order.
