Dhaka, Bangladesh (BBN) – The Bangladesh Bank (BB) has slashed interest on its export development fund (EDF) scheme by 1.0 percentage point for the next six months aiming to help exporters recover their losses caused by the ongoing political turmoil.
Exporters are now allowed to get such foreign currency loan on payment of the London Inter-Bank Offered Rate (LIBOR) plus 1.50 percent interest instead of the London Inter-Bank Offered Rate (LIBOR) plus 2.50 percent earlier, according to a circular, issued by the BB on Thursday.
“The central bank has slashed the interest rate on EDF scheme to to help exporters cope with the ongoing shipment disruptions,” a senior official of the BB told BBN in Dhaka.
The apparel sector, which accounts for about 80% of the country’s total export, has been under tremendous pressure since October, following frequent spells of blockades and shutdowns, enforced by the opposition parties over the structure of the poll-time government in Bangladesh.
The central bank is now providing the re-financing facility to the exporters through commercial banks as short-term liquidity support.
Under the existing rules, the EDF financing is allowed for input procurements against back-to-back import letters of credit (LCs) or back-to-back inland 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.
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, another BB official said.
The timeframe is extendable by the BB up to 270 days in case of a longer period for repatriation of export proceeds, he explained.
The central bank has increased the allocation of the EDF by 25 percent to $1.0 billion from the previous $800 million recently to meet the growing demand of the country's exporters.
BBN/SSR/AD-17Dec13-12:41 pm (BST)