Published:  02:58 AM, 18 May 2020

BB opens larger scope of borrowing for apparel exporters

'It creates confusion when export orders being cancelled'

BB opens larger scope of borrowing for apparel exporters

The Bangladesh Bank (BB) on Sunday allowed apparel exporters to have larger borrowing for input procurement for producing export goods.

The loan is obtainable from a special fund of the central bank called Export Development Fund (EDF) at reduced rate of interest at 2%. Earlier, the rate of interest for use of the fund was 7% or LIBOR (London Inter-Bank Offered Rate) plus 1.5%. According to a circular of the Foreign Exchange Policy Department (FEPD) of BB, the loan limit was expanded to Tk 2.55 billion ($30 million) from Tk 2.125 billion ($25 million) per entity for input procurement from abroad. The Bangladesh Textile Mills Association and Bangladesh Garment Manufacturers and Exporters Association members will be entitled to enjoy the extended loan facility from EDF, according to the circular.

The central bank's initiative came following prime minister's directive to facilitate more funds for exporters so the country's exports can keep continue.

On April 7 last, the BB had expanded the EDF to $5.0 billion from $ 3.5 billion in line with the government's efforts to cope with the economic impacts of the Covid-19 pandemic. The FEPD has served the circular to all of the Authorized Dealers (ADs) operating under different banking companies with immediate effect.

The FEPD said this measure is temporary and will remain effective for disbursement until December 31, 2020, case to case basis, depending on the actual needs of concerned mill/s.

It said other relevant instructions contained in the FEPD master circular (No. 45/2017) and its subsequent circulars. The EDF scheme is specially designed to facilitate raw material imports under back-to-back letters of credit.

Lauding the initiative amid Covid-19 pandemic, business leaders said it would benefit largely the BGMEA and BTMA members.

Economists, however, confused of the initiative at a time when export orders are being cancelled amid a demand side slump globally with the advent of the pandemic.

"I see a mismatch here between the cancellation of large number of export orders as claimed by BGMEA and the BB's initiative of expanded lending to apparel exporters from EDF," said Dr. Nazneen Ahmed, senior research fellow of Bangladesh Institute of Development Studies.

The BIDS economist also observed that the eagerness of the apparel exporters to get expanded loan from EDF has become testimony of sufficient export orders in hands and there are more demands in the coming days.

"There may have true cause to grab the clothing market that is planned by different sourcing agencies to shift from China. If it is true, why they (apparel exporters) are creating pressure on the government to have low-cost financing to pay workers?. Now, the question is what information they are giving to the government with regard to the economic recovery? I am really confused," she added.

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