Bangladesh Bank raises EDF to $2bln to aid exporters

The Export Development Fund (EDF) has been raised to $2 billion by the Bangladesh Bank, said its Forex and Treasury management general manager Kazi Saidur Rahman.

This means the EDF allocation has been raised by $0.5 billion over the previous allocation, perhaps the highest in recent years.

"The increase in EDF allocation follows growing needs of the exporters in Bangladesh . Those exporting garments and other commodities need support to increase exports," he told bdnews24.com.

The central bank has been raising allocation for the export development fund (EDF) periodically since it was first set up in 1989 with a mere $ 3 million to help exporters in Bangladesh.

The allocations were raised from time to time and touched the $ 1 billion mark in July 2013.

In April 2014, it was raised by 20 per cent to US$ 1.2 billion from $ 1 billion to meet the growing demand from the country's exporters.

Later, it was raised to $ 1,5 billion  in June 2014.

"The increase in EDF allocations follows greater demand of support from our export industries. Earlier only 2-3 export items like garments qualified for EDF assistance. Now nearly 10 export items qualify for assistance," said Kazi Saidur Rahman.

He said increase in EDF allocations have positively impacted on the growth of Bangladesh's export.

"Most exporters now seek assistance from EDF to improve their capacity and volume of exports."

The central bank had earlier slashed the interest rate on its EDF scheme for six months by 1.0 percentage point to help exporters  recover from loss sustained during sustained spells of political unrest in 2013-14.

After that, exporters started getting foreign currency loans through commercial banks at the interest rate of London Inter-bank Offered Rate (LIBOR) plus 1.50 per cent instead of 2.50 per cent as before.

Later the LIBOR plus 2.50 percent interest rate was restored after the six month period but even then the EDF loans are available at lesser interest.

"Since the interest on EDF loans are less, exporters try to avail them. That helps them grow their business and export more, which in turn boosts the country's foreign exchange reserves," Kazi Saidur Rahman said.

In 2013-14 , despite waves of political unrest and global uncertainties, Bangladesh's export registered a 11.69 percent growth.

In the first six months of the current fiscal, export growth is more than 2 percent over the same time in the previous fiscal.

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.

BB was also providing re-financing facility to the exporters through commercial banks as a short-term liquidity support.