Primary textile-industry owners have urged Bangladesh Bank to increase the Export Development Fund (EDF) limit and cut its interest rate to help protect the export competitiveness of the country's primary textile sector, which is facing mounting financial and cost pressures.
The Bangladesh Textile Mills Association (BTMA) President Showkat Aziz Russell made the appeal in a letter sent on January 26 to Bangladesh Bank Governor Dr Ahsan H Mansur, calling for policy rationalisation of the EDF to ensure uninterrupted raw material supply for export-oriented industries.
In the letter, Mr Russell said BTMA is the largest representative trade body of the primary textile sector, with 1,869 member mills engaged in spinning, weaving and dyeing-printing-finishing activities. The sector has attracted investment of about $23 billion, the highest in the country's private sector.
He noted that textiles and apparel account for around 85 per cent of Bangladesh's total export earnings, while domestic textile mills supply nearly 70 per cent of the raw materials used by the export-oriented garment industry.
The primary textile sector retains about 30 per cent of foreign exchange on average and saves nearly $8 billion annually by meeting domestic demand for a population of around 170 million, making it a critical export-supporting and import-substituting industry.
According to BTMA, the sector is currently under severe strain due to global geopolitical tensions, economic slowdown, domestic political uncertainty, increases in energy and gas prices, higher labour costs, rising raw material prices, elevated lending rates and growing overhead expenses.
These pressures have hampered full utilisation of production capacity, while heavy dependence on imported cotton continues to expose the sector to external market volatility.
The association said EDF financing has played a key role in enabling local mills to supply nearly 90 per cent of knitwear and about 60 per cent of woven garment raw material requirements through domestic yarn production. However, existing EDF management rules have emerged as a major challenge for the sector.
At present, a uniform enterprise-level EDF ceiling of $20 million or an amount equivalent to export proceeds realised in the previous 12 months, whichever is lower, is applied to all firms regardless of size and export capacity.
BTMA said this limit does not reflect actual production capacity or export performance and has constrained large and regular exporters from importing adequate raw materials.
In addition, the current EDF lending rate, set at Overnight SOFR plus 1.5 per cent, has significantly increased financing costs.
With Overnight SOFR hovering around 3.66 per cent, the effective interest rate stands at about 5.16 per cent. Delays of three-and-a-half to four months in receiving EDF funds from the central bank also force firms to rely on gap financing at an additional cost of around 1.0 per cent, further raising overall borrowing expenses.
Mr Russell noted that a uniform EDF limit creates risks of inefficient use in some cases, while restricting genuine exporters in others, with direct implications for export performance.
He recalled that the EDF limit for BTMA member mills was previously $30 million, with a total interest rate of 3.0 per cent, which he said was more supportive of export-oriented industries.
Considering the current economic realities, BTMA proposed linking enterprise-level EDF limits to actual export performance by setting the ceiling at 60 per cent of export proceeds realised over the most recent 12 months, instead of applying a single cap.
This approach, the association said, would ensure more effective and targeted use of EDF resources.
The BTMA president also welcomed the government's efforts to strengthen foreign exchange reserves and said the improved reserve position provides room to enhance trade-related support.
In this context, he urged Bangladesh Bank to increase the overall EDF size from the existing $2.0 billion in line with the growing needs of importers and exporters.
BTMA stressed that rationalising the EDF limit and interest rate is essential to maintain export competitiveness, control production costs and safeguard the export capacity of the primary textile sector at a time of heightened global and domestic challenges.
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