United News of Bangladesh

The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) has urged Bangladesh Bank (BB) to double the Export Development Fund (EDF) to $5 billion to support exporters amidst ongoing global economic challenges. The demand was placed at a meeting with BB Governor Mostaqur Rahman, held at the central bank on Monday. The apex trade body also proposed increasing the "Single Borrower Exposure Limit" from the current 15% to 25% to accommodate the rising costs of doing business. FBCCI calls for policy continuity, tax reforms to boost investment in FY27 budget During the discussion, the FBCCI representatives further advocated for keeping interest rates within single digits and relaxing loan default regulations. In written proposals submitted to the BB chief, the FBCCI highlighted that geopolitical instability and global economic shifts have significantly driven up the prices of industrial raw materials, capital machinery, energy, and transportation. "The ongoing conflict in the Middle East poses a threat to energy supplies, remittance inflows, and overall economic activity," the proposals stated, noting that international demand for Bangladeshi products has also faced downward pressure. Key recommendations from the private sector The FBCCI placed a broad set of coordinated recommendations aimed at stabilising the financial sector and sustaining industrial growth. It emphasised the need for good governance and structural reforms in the banking sector. It called for effective measures to recover laundered money and urged the central bank to protect the interests of depositors and businesses during bank mergers. To keep production and trade afloat, the trade body demanded a steady supply of US dollars, a stable exchange rate, and a simplified process for opening Letters of Credit (LCs). For industries struggling with the current economic climate, the FBCCI suggested extending the loan rescheduling period from the current three months to six months, alongside providing easier loan terms and incentives. It also emphasised expanding support for SMEs and women entrepreneurs through enhanced banking access, dedicated helpdesks, and collateral-free loans. To reduce energy import costs, the trade body recommended low-interest loans for renewable energy projects, including solar power. It proposed the formation of a special committee, headed by a Deputy Governor of Bangladesh Bank, to quickly resolve banking-related issues facing the industrial sector. The business leaders also urged the government to reduce its borrowing from the banking sector to ensure a healthy flow of credit to the private sector and to maintain incentives for remittance to encourage higher inflows of foreign currency.

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. Read: BB lets dealers to open foreign currency deposit accounts 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.

The government has so far allotted some Tk 103,117 crore under 19 packages which is 3.7 percent of the GDP to fight the coronavirus pandemic and protect people amid the crisis.