The central bank has increased the allocation of the export development fund (EDF) by 25 per cent to $1.0 billion from the previous $800 million to meet the growing demand of the country’s exporters, officials said Thursday.
“We’ve enhanced the amount of EDF allocation to encourage the exporters for strengthening their businesses. Other provisions related to EDF will remain unchanged,” a senior official of the Bangladesh Bank (BB) told the FE.
The central bank is providing the re-financing facility to the exporters through commercial banks as short-term liquidity support.
Under the existing provisions, the EDF financing is allowed for input procurements against back-to-back import letters of credit (LCs) or back-to-back inland LCs in foreign exchange, by manufacturers producing final output for direct export and also by producers of local deliveries to manufacturers of the final export.
The central banker also said the EDF loans from the central bank are payable by the banks upon receipt of export proceeds within 180 days from the date of disbursement.
The timeframe is extendable by the BB up to 270 days in case of a longer period for repatriation of export proceeds, the central banker said.
Currently, the commercial banks take loans from the central bank under the EDF scheme at the London Inter-Bank Offered Rate (LIBOR) plus 1.0 per cent interest, and they are extending credit to exporters at LIBOR plus 2.50 per cent interest.
The country’s exporters, particularly those of apparel sector, welcomed the BB’s latest move, saying that it will create a positive impact on export businesses in the near future.
“It will help the exporters to meet their short-term liquidity requirement with lower interest rate,” former president of Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Fazlul Hoque told the FE.
He also said the banks should take initiatives for providing the loan to entrepreneurs, specially the small and medium ones.