Bangladesh Bank has increased the size of the Export Development Fund (EDF) by 16.7% to $3.5 billion from $3 billion to cater to more exporters.
The decision was taken on Wednesday to increase exports and revive the demand of exports, so that they could get foreign currency loans from the fund at reduced interest rates.
EDF was introduced by the central bank in 1988 with a capacity of $30 million, which is gradually increased over time.
Currently the EDF interest rate is fixed at 2.5%, plus Libor (London Interbank Offered Rate). Businesses from various sectors, including garments, can take loans up to $25 million for a maximum of 180 days.
Under the existing provision, the EDF financing is allowed for input procurements against back-to-back import letters of credit or inland back-to-back LCs in foreign exchange by manufactures producing final output for direct export.
The EDF loans from the central bank are payable by the banks upon receipt of export proceeds within 180 days from the date of disbursement.
The timeframe is extendable by the central bank up to 270 days in case of a longer period taken for repatriation of export proceeds.
Sources at the central bank said they had sold $1.66 billion to all the banks in the ongoing fiscal year so far, but the dollar rate is still increasing consistently.
Yesterday the buying rate of $1 was Tk84.15, while the foreign exchange reserve was $31.23 billion.
Executive Director and Spokesperson of Bangladesh Bank Serajul Islam said the fund was increased to boost exports and reduce liquidity crisis in the banks, as a result of which exporters will get more loan facilities now.
Bangladesh Bank on December 31, last year, eased the process of EDF to facilitate access to financing in foreign exchange for input procurements by manufacturer-exporters.
“To bring ease in operations of EDF, revised operational procedure prepared through compilation of existing instructions,” said a central bank circular.
Authorized Dealer (AD) banks can borrow US dollar funds from the EDF against their foreign currency loans to manufacturer-exporters for input procurements. At their option, the ADs can also lend to some extent from their own foreign exchange funds for input procurements.
The Export Development Fund is managed by the Forex Reserve and Treasury Management Department (FRTMD) at the head office of Bangladesh Bank. Borrowing by ADs from the EDF and repayments thereof are handled through head offices or principal offices of the AD banks concerned.
Earlier, Bangladesh Bank increased the loan limit of its Export Development Fund to $25 million from $20 million.
The decision is applicable for member mills of Bangladesh Garment Manufacturer and Exporter Association (BGMEA) and Bangladesh Textile Mills Association (BTMA).
