The scheme is to facilitate raw material imports under back-to-back letters of credit
Businesses have welcomed the government's decision to expand Bangladesh Bank's Export Development Fund (EDF) saying it will increase cash flow, but an economist says the exporters will not be immediately benefitted from it.
As part of a set of stimulus packages to cushion the coronavirus impact, Prime Minister Sheikh Hasina announced on Sunday to increase the EDF from $3.5 billion to $5 billion.
The scheme is to facilitate raw material imports under back-to-back letters of credit (LCs).
The prime minister said that the move would result in adding an additional Tk 12,750 crore to the EDF while its interest rate would simultaneously be brought down to 2%.
The existing EDF interest rate is 2.73% in line with the current London Interbank Offered Rate (LIBOR) + 1.5 percent.
Business leaders said the move will increase cash flow.
"Increasing the EDF means exporters will get more fund," Bangladesh Textile Mills Association President Mohammad Ali Khokon before describing the move to cut the interest rate as very timely.
It would significantly reduce the cost of fund, according to him.
Sharif Zahir, a director at the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), echoed. "It would increase cash flow and exporters will be benefitted."
Economist Khondaker Golam Moazzem, however, says businesses have to wait to reap the benefit from the move.
“The global economy is passing though a gloomy situation and international trade is significantly hindered due to the coronavirus outbreak, which means exporters will not get any immediate benefit from the fund,” the research director at Centre for Policy Dialogue (CPD) told Dhaka Tribune.
The move will bring benefits once global trade picks up pace again, Moazzem said before adding the government that all export-oriented sectors have access to the fund.