October 30, 2020: The central bank has slashed interest rates on loans under the Export Development Fund (EDF) to help exporters weather the pandemic-related disruptions.
The revised rates will allow exporters to borrow from the low-cost fund at a rate of 1.75 per cent instead of the previous 2.0 per cent.
Such an interest rate on loans under the EDF will continue until March 31, 2021, according to a notification, issued by the Bangladesh Bank (BB) on Wednesday.
Authorised dealer (AD) banks will also get similar benefits with access to such loans from the central bank at 0.75 per cent interest rate, down from 1.0 per cent.
On April 07, the BB cut interest rates on the EDF loans on the same ground.
The BB’s latest move came against the backdrop of slower export earnings growth in recent months mainly due to the ongoing Covid-19 pandemic.
Bangladesh’s export earnings grew by 2.97 per cent to $9.70 billion during the July-September period of the fiscal year (FY), 2020-21, from $9.42 billion in the same period of FY ’20.
“We’ve slashed the interest rates on EDF loans further, aiming to help boost the country’s export earnings amid the pandemic,” a BB senior official told the FE.
The central bank has also considered a lower London Inter-bank Offered Rate (LIBOR) that was linked to the low-cost fund earlier for re-fixing the interest rate, he noted.
In a month, LIBOR came down to 0.15 per cent this week from 1.79 per cent a year ago, according to the international media reports.
The central bank has enhanced allocations for the EDF to $5.0 billion from $3.50 billion in line with the government’s efforts to minimise the economic impacts of the coronavirus crisis.
Exporters welcomed the BB’s latest move, saying that it will help increase export earnings in the coming months defying the challenges posed by the Covid-19 pandemic.
Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association (BTMA), said it will help encourage exporters to strengthen their efforts to boost the overall export income despite the pandemic.
Mr Khokon, also managing director of Maksons Spinning Mills Limited, said such low-cost fund is helpful for the country’s export sector’s survival.
Talking to the FE, Fazlul Hoque, former president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), said it is a timely and positive decision of the central bank, which will help improve competitiveness of the exporters in the global market.
“Interest expenditure of the exports will be reduced slightly after slashing the interest rate on the EDF loans by the BB further,” a senior executive of a leading private commercial bank told the FE.
Under the existing provisions, the EDF financing is allowed for input procurements against back-to-back import letters of credit (LCs) or inland back-to-back LCs in foreign exchange by manufactures producing final output for direct exports and also by producers of local deliveries to manufacturers of the final export.
The EDF loans are payable by the banks upon receipt of exports proceeds within 180 days from the date of disbursement, extendable by the BB up to 270 days in case of a longer period for the repatriation of export income.
Source: The Financial Express