The Export Development Fund, formed to help exporters with foreign currency on relaxed conditions, has dropped by $1.0 billion to $6.0 billion, a development that may ease pressure on forex reserves.
Businesses were borrowing less from the foreign-currency fund as Bangladesh Bank formed an alternative fund in the local currency, according to Bangladesh Bank spokesman Mezbaul Haque.
The EDF was set up in 1989 with a tiny amount of reserves, which gradually increased to $7.0 billion. Exporters can pay off their loans from the earnings from their exports. When the export earnings are wired, the bank deducts the loan amount, converts the rest of it into the taka and transfers the amount to the customer.
Exporters can borrow loans under the EDF at a 4.0 per cent interest rate, reports bdnews24.com.
Bangladesh’s forex reserves came under pressure largely due to the global economic crisis. Bangladesh reached an initial agreement with the International Monetary Fund for a $4.5 billion loan to build a much-needed buffer.
The IMF advised Bangladesh Bank to exclude illiquid assets, such as EDF, from the reserves calculation.
Earlier in January, the central bank set up a Tk 100 billion Export Facilitation Pre-finance Fund, allowing exporters to borrow money at 4.0 per cent interest for 180 days.
However, exporters cannot avail themselves of loans under EFPF if they had already borrowed from EDF.
Bangladesh’s reserves declined to $32.48 billion as of Jan 18 from $45.2 billion a year earlier.