Bangladesh Bank has raised the Export Development Fund (EDF) to $5.0 billion in line with the government's efforts to limit the economic impacts of the coronavirus crisis.
Exporters will now be able to borrow from the EDF at an interest rate of 2.0 per cent, according to the central bank, reports bdnews24.com.
Previously, the lending rate was set in accordance with the Libor or London interbank offered rate plus 1.5 percentage points, which equated to around 4 per cent.
The Libor is what the banks charge each other for short-term loans in the London Interbank Market. It serves as a global benchmark for the banks for short-term interest rates.
But the interest rate will be independent from the Libor, according to Bangladesh Bank officials.
Prime Minister Sheikh Hasina had mentioned that the EDF would be raised from $3.5 billion to $5 billion while unveiling the Tk 727.5 billion stimulus to tackle the potential economic fallout from the coronavirus.
The central bank has increased the fund accordingly, said Executive Director Kazi Saidur Rahman.
“We have already increased the EDF to $5bn. A circular on this will be issued on Tuesday,” he said.
“Now the Libour won't have any bearing on loans from the EDF. The interest rate will be fixed at 2.0 per cent only. Borrowers will pay 1.0 per cent to Bangladesh Bank and 1.0 per cent to the banks who distribute the loans,” he said.
The central bank created the EDF with the help of the World Bank after Bangladesh's independence.
What started out as a $15 million fund has gradually risen to $3.5 billion as the country's export earnings rose.
On Mar 15, Hasina announced a Tk 50 billion package for the export sector as the coronavirus began taking a toll on the global economy.
The prime minister announced four new packages on Sunday, including assistance for industries and service sectors affected by the pandemic, loans for small and medium enterprises, raising the EDF and introducing pre-shipment credit refinancing scheme.
The EDF will be raised to $5bn to increase the import of raw materials under back to back LC, the prime minister had said.
An amount of Tk 127.5 billion equivalent to $1.5 billion will be added to the EDF.
Members of Bangladesh Garment Manufacturers and Exporters Association, Bangladesh Knitwear Manufacturers and Exporters Association, and other exporters’ associations are eligible to take loans from the EDF.
An exporter of woven and knit garment can borrow a maximum of $25 million from the fund.