• Saturday, Sep 25, 2021
  • Last Update : 01:09 am

Apparel exporters should be repaying the stimulus funds now. But they are pleading for more time

  • Published at 02:18 am January 18th, 2021
Garment workers in a factory <strong>Rajib Dhar/Dhaka Tribune</strong>
Rajib Dhar/Dhaka Tribune

'We are facing an acute liquidity crisis to bear the current expenses as it is'

He has 2,500 workers to support and scores of operational expenses to bear but no revenue coming in.

But from Sunday, the apparel exporter, who is based in Chittagong, has to begin servicing for the loan he took from the government’s stimulus fund for the export-oriented industries.  

“Definitely, the stimulus package brought us relief, but it is now a burden for us as we do not have sufficient work orders, which is the prime source of our income,” said the beleaguered apparel exporter who shied away from going on record for fear of reprisal.

On March 25, just as the coronavirus was going full steam ahead on its devastating rampage across the globe, the government announced a Tk 5,000-crore special package to pay the wages and allowances of export-oriented industries' workers for three months starting from April.

As the fund was later found to be inadequate, the government released another Tk 2,500 crore from the bailout package rolled out for the large industries affected by the pandemic.

Banks disbursed the amount directly to the workers' bank accounts or mobile financial service accounts. 

The interest-free loan carried a 2 per cent service charge and had to be paid in 18 equal monthly instalments after a six-month grace period.

Then in July, the government made Tk 3,000 crore available to the export-oriented industries to help them provide wages and salaries for the month. 

But this time, the borrowers will have to pay 4.5 per cent interest rate to avail the fund while banks will get 9 per cent interest as the government will give the rest as subsidy.

“When I took on the loan from the stimulus package, I thought I would be able to realise the $1 million in arrears from my global buyers,” says the anxious exporter.

That has not been the case as economic recovery stalled in much of the Western world in the face of the second wave of coronavirus cases.

Like him, there are hundreds of others in the same boat, all praying for an extension of the grace period to repay the stimulus funds.

“Right now, I am in the red,” said Irfanul Hoque, director of Fatullah Fabrics.

His consignment was stranded for over a month at an American port and he had to pay a hefty discount of $150,000 to get his buyer to take delivery of the goods.

At the same time, he had to pay the wages of his workers in full from August onwards along with the bills for raw materials.

“The stimulus fund from the government enabled me to stay afloat. But as a small entrepreneur, I am in dire straits as there are not enough work orders.”

And the few that he has received are being held up amid the second wave of the pandemic.

“We are facing an acute liquidity crisis to bear the current expenses as it is,” Hoque added.  

There is simply a cash flow crisis among the apparel exporters at present, said Shahidul Islam, managing director of Eurotex Group.

If the government extends the grace period, it would save the apparel exporters avert the economic fallout from the second wave of coronavirus cases in the Western world, said Fazlee Shamim Ehsan, a director of the Bangladesh Knitwear Manufacturers and Exporters Association.

The Bangladesh Garment Manufacturers and Exporters Association has applied to the finance minister for amendment of the repayment term from 24 months to 36 months, with a year’s grace period instead of six months.

The repayment would mean 20 per cent in additional wage burden on the factories, said Rubana Huq, president of the BGMEA. 

“Given the current scenario, this is difficult.”

Garment shipments brought home about $27.4 billion last year, which is the lowest since 2016, according to data from the Export Promotion Bureau.

The first and second waves of the pandemic impacted the local apparel industry in different magnitudes.

Instead of cancelling orders, buyers are now deferring order placements and splitting those into batches with shorter lead time, according to Huq, also the MD of Mohammadi Group.

“This has an adverse impact on our industry since factories are not being able to have a forecast and plan their capacity.”

In this backdrop of multi-pronged crisis, it is getting increasingly difficult for the factories to stay on course without additional fiscal support by the government, Huq added.

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