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The central bank has increased the interest rates on loans under Export Development Fund (EDF) scheme aiming to adjust the lending rates with traditional market, officials say.
Under the revised interest rates, exporters will now be able to borrow from the low-cost fund at 3.0-per cent interest rate instead of 2.0 per cent earlier, according to a notification, issued by the Bangladesh Bank (BB), on Wednesday.
On the other hand, authorised dealer (AD) banks will get such loans from the central bank by paying 1.50 per cent instead of 1.0 per cent earlier, it adds.
The central bank further says that such interest rates on EDF loans will continue until further instructions.
The latest BB move comes against the backdrop of a rising trend in interest rates globally to contain inflationary pressure on the economies.
Exporters have also been signalled to go for traditional foreign-currency loan market gradually instead of the concessional one, the officials add.
“Such concessional credit facility will be phased out after LDC graduation,” explains a BB senior official.
The size of the EDF is now $7.0 billion.
Currently, borrowers may avail foreign-currency loans by paying more than 6.0-per cent interest rate from the banks’ offshore banking operations.
“It’s acceptable for a short period considering the country’s overall foreign exchange situation,” Bangladesh
Textile Mills Association president Mohammad Ali Khokon tells the FE.
Mr Khokon, also managing director of Maksons Spinning Mills Ltd, urges the BB to revert to the previous level of interest rate immediately to help enhance export earnings.
Under the current provisions, EDF financing is allowed for input procurements against back-to-back import letters of credit (LCs) or inland back-to-back LCs in foreign exchange, by manufacturers producing final output for direct export and also by producers of local deliveries to manufacturers of the final export.
EDF loans are payable by banks upon receipt of exports proceeds within 180 days from the date of disbursement, extendable by the BB up to 270 days in case of a longer period for repatriation of export proceeds.
On the other hand, the central bank has extended the usance period for imports of industrial raw materials, agricultural machinery and chemical fertilisers under a supplier’s or buyer’s credit. A usance or a deferred LC means that even after buyers have received goods or services, they get a grace period to make the payment to banks or other lenders.
“It has now been decided to extend the usance period to 360 days from 180 days effective until 31 December 2022,” the BB says in another notification.
In January 2022, the BB pushed back the usance period to 270 days from 180 days.
The extended usance period, however, will not be applicable to imports under EDF loans, it adds.
“We’ve extended the usance period aiming to discourage the outflow of foreign currencies,” another BB official tells the FE.
A treasury head of a leading private commercial bank says it is a short-term measure to decrease import payment obligatory pressure on the economy.
(FE)
