Pre-shipment finance

Bangladesh Bank issued a circular to support exporters amid ongoing vulnerabilities, as exports have been declining compared to the previous year. The circular allows exporters to avail pre-shipment finance under the Export Facilitation Pre-Finance Fund (EFPF). Under this scheme, Bangladesh Bank has permitted Tk 50 billion to continue as a revolving facility until 31 December 2030, out of the total Tk 100 billion EFPF fund.

Since the world is facing economic uncertainty due to geopolitical tensions, including the ongoing Russia-Ukraine war, global demand has, in some cases, shrunk, and exports from Bangladesh have shown a declining trend this year. Due to changes in export routes and other external factors, production costs have also increased in some cases. As a result, profitability has decreased, making it difficult to remain competitive in the global market.

This circular will definitely help relieve exporters from excessive borrowing costs from banks, as financing under this scheme is relatively low-cost compared to market rates. Proper utilisation and monitoring will create a win win situation for both scheduled banks and export-oriented clients, provided it is implemented effectively.

It is a matter of concern that the India-EU FTA poses a challenge for Bangladesh's survival in the EU market, while LDC graduation will subject Bangladesh to tariff pressures from 2029. Moreover, the agreement on reciprocal tariffs with the USA has not yielded any significant positive returns for Bangladesh. Therefore, the challenges ahead are likely to be severe. In this context, facilitating exports through the pre-finance scheme is a prudent step to help exporters navigate these challenges.

Kawsik Azad Pronoy

A Banker

kawsikdbbl@gmail.com