EDF for exporters raised by 25pc

Allocation to the export development fund (EDF) has been raised by 25 per cent to US$1.5 billion to meet a growing demand from the exporters, who largely help the current surge in the country's foreign-exchange reserves.

The central bank has enhanced the allocation to the EDF scheme aiming to facilitate the country's exporters in strengthening their business activities, officials said Tuesday.

"We're providing the refinancing facilities to the exporters through commercial banks as short-term liquidity support," a senior official of the Bangladesh Bank (BB) told the FE about the export-promotion measure.

He said the EDF allocation was hiked on the back of the country's sound foreign exchange (forex) reserve that crossed $21 billion-mark recently.

"The reserve is increasing gradually due mainly to higher growth of export earnings and an upturn in inward remittance ahead of the holy Ramadan," the central banker said to explain the factors pushing up the coffers of foreign currency.

In a span of time between June 1 and June 20, Bangladesh received $ 894.98 million as remittances from expatriates, who are working in different parts of the world, according to the BB official.

The reserves rose to $21.32 billion Tuesday, setting a new record, from $21.25 billion on the previous working day, according to the central bank reckonings.

With this amount of the greenback the country can foot seven months' import bills, according to financial experts' views.

Banking on the buoyancy, the central bank has also increased maximum single-borrower limit for manufacture-exporters to $15 million from $12 million.

The BB issued a circular to this effect Tuesday, asking the commercial banks to follow the latest ceiling in sanctioning loans under EDF to the members of Bangladesh Textile Mills Association (BTMA), Bangladesh Garment Manufactures and Exporters Association (BGMEA) and Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA).

Currently, exporters are allowed to get such foreign-currency loan paying at the London Inter-bank Offered Rate (LIBOR) plus 1.50 percent interest instead of previous 2.50 per cent.

Earlier on December 15 last year, the central bank slashed interest rate on its EDF scheme for the next six months by 1.0 percentage point to help exporters in recovering their loss caused by a wave of political unrest.

Under the existing provisions, the EDF financing is allowed for input procurements against back-to-back import letters of credit (LC) or inland back-to-back LCs in foreign exchange, by manufactures 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. The timeline is extendable by the BB up to 270 days in case of a longer period taken for repatriation of export proceeds.