Bangladesh Bank (BB) has raised the interest rate on borrowing from the Export Development Fund (EDF).
The central bank on Wednesday fixed 1.0 per cent per annum to 1.5 per cent for Authorized Dealers (ADs) while the ADs will charge 3.0 per cent per annum on their USD loan disbursement to manufacturer-exporters.
The Foreign Exchange Policy Department of BB on Wednesday issued the circular and all authorized dealers in foreign exchange for immediate effect of the notification.
The size of EDF was increased to $ 7 billion from $ 6 billion to meet the growing demand among exporters in the immediate past fiscal year.
In June 2021, the EDF went up to $ 6 billion from $ 5.5 billion, while the fund rose to $ 5.5 billion from $ 5 billion in March of the year. It increased to $ 5 billion from $ 3.5 billion in April 2020.
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The growing demand and low-interest rate of lending from the EDF prompted the central bank to increase the size of the fund.
Earlier on April 7, 2020, BB lowered the interest rate to 2 per cent on its EDF for the first time following a downturn in the country’s economic activities created by the Covid-19 pandemic.
Before that, the interest charge was a six-month London Interbank Offered Rate (LIBOR) plus 1.50 per cent.
Bangladesh established EDF in 1989, intended to facilitate financing in foreign currency for input procurements by manufacturer-exporters.