The central bank is set to extend the enhanced credit limit under its Export Development Fund (EDF) scheme for the textiles and clothing exporters by six more months to help boost proceeds from overseas sales.
The members of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Bangladesh Textile Mills Association (BTMA) are likely to enjoy the enhanced loan ceiling until June 30 of this year instead of December 31 of last year, officials said.
“We’ve decided to issue a circular in this connection shortly in line with the request of the BTMA leaders in a meeting on January 24,” a senior official of the Bangladesh Bank (BB) told the FE on Tuesday.
He also said the central bank has decided to extend the increased credit limit for local apparel and clothing exporters to meet their growing demand for foreign currency.
“We expect that such policy support will help revamp the country’s overall export earnings in future,” he noted.
Talking to the FE, Mohammad Ali Khokon, president of the BTMA, said: “We’ve urged the central bank to extend the credit limit until June 30, instead of December last to help boost the country’s overall export earnings.”
The demand for funds of apparel and clothing exporters has increased significantly following recent high prices of cotton in the global market, explained Mr. Khokon, managing director of Metro Spinning Limited.
The BB’s latest move came against the backdrop of a falling trend in export earnings in recent months – mainly due to the global economic slowdown caused by the coronavirus outbreak.
Bangladesh’s export earnings dropped by more than 6.0 per cent to US$3.31 billion in December 2020 from $3.52 billion in the same month of 2019 due to the Covid-19 pandemic second wave, particularly in America and Europe.
On May 17 last year, the BB enhanced the loan limit under the EDF scheme from $25 million to $30 million for the BGMEA and BTMA members for input procurement.
Meanwhile, the central bank has increased the allocation of EDF scheme by nearly 43 per cent or $1.50 billion to $5.0 billion from the previous level of $3.50 billion to support the country’s exporters.
The BB has already slashed interest rates on loans under the EDF scheme to help the exporters tide over the pandemic-related disruptions.
The revised rates allow them to borrow from the low-cost fund at a rate of 1.75 per cent instead of the previous rate of 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 central bank on October 28, 2020.
The EDF financing allows manufacturers to procure inputs or raw materials against back-to-back import letters of credit (LCs) or inland back-to-back LCs in foreign exchange to produce final output for direct export and local delivery to manufacturers of final export.