Export Development Fund raised to $5bn, lending rate 2%

From now on, export-oriented firms will be able to borrow more from the Export Development Fund with a lower interest rate.

In an effort to extend support to these firms during the coronavirus outbreak, the central bank has increased the fund to $5 billion from $3 billion, with the interest rate having been lowered to 2 percent.

A Bangladesh Bank circular on Tuesday confirmed the announcement in line with the government's efforts to check the impact of the Covid-19 pandemic on the export sector.

The Export Development Fund is an incentive that aims to prepare, facilitate and support exporters to penetrate global markets.

It was introduced in Bangladesh by the central bank in 1988 with a capacity of $30 million, which was gradually increased to reach $5 billion today.

The lending rate was set in November last year at the six-month London Interbank Offered Rate plus 1.5 percent. As a result, the actual interest rate surpassed 2.5 percent.

Businesses from various sectors, including garments, can take loans from this fund for a maximum of 360 days.

Members of the Bangladesh Garment Manufacturers and Exporters Association and the Bangladesh Textile Mills Association can borrow up to $25 million from this fund. The ceiling is $20 million for knit fashion manufacturers and exporters.

The Bangladesh Bank circular said the loan ceiling for knitwear factories has been raised from $15 million to $20 million, which will be effective immediately.

Members of the Bangladesh Knitwear Manufacturers and Exporters Association will be eligible to avail this loan, said the circular.

"The fund has been raised to boost exports during the post-coronavirus situation," Bangladesh Bank Executive Director Md Serajul Islam told The Business Standard. 

Prime Minister Sheikh Hasina recently unveiled a set of financial support packages, involving Tk72,750 crore, to shield the economy from the impacts of the coronavirus pandemic, providing low-cost funds to affected industries. Of the incentive package, Tk12,750 crore fund was said to be included in the Export Development Fund.

According to the Export Promotion Bureau, from July to January of the 2019-20 fiscal year, readymade garments and knitwear exports respectively faced 5.71 percent and 5.13 percent negative growth.

Moreover, trade bodies expressed fear that the coronavirus pandemic will hamper businesses further in the coming days.

Banking hours extended

In another circular, the Bangladesh Bank instructed foreign exchange dealing banks to extend their transaction hours to 2pm from Wednesday.

But general cash transactions will be conducted as usual from 10am to 1pm till April 13.