BB resets loan ceilings of export development fund

The central bank has reset the ceiling of the US dollar loans from its Export Development Fund (EDF) to manufacturers and exporters for input procurements, with a view to stopping a further fall in foreign currency reserves.

Established in 1989, the EDF facilitates access to financing in foreign exchange for input procurements by manufacturer-exporters. Authorised dealer banks can borrow US dollar funds from the fund against their foreign currency loans to manufacturer-exporters.

The central bank has brought down the volume of the EDF to slightly over $5 billion from about $7 billion seen before Bangladesh's foreign currency reserves started to come under pressure owing to a surge in import bills in the middle of 2022.

The reserves stood at $31.24 billion on April 5, down nearly 30 per cent from $44.22 billion a year earlier, Bangladesh Bank data showed.

Under the circumstances, the BB today said it had decided to reset the ceiling at $10 million from $15 million for input procurements under back-to-back LCs (BBLCs) against export orders.

The move is aimed at bringing a wider range of customers for EDF loans, it said in a notice.

BBLCs involve two letters of credit to secure financing for a single transaction. These are usually used in a transaction involving an intermediary between the buyer and seller.

The limit for imports under BBLCs by individual member mill of the Bangladesh Garment Manufacturers and Exporters Association and the Bangladesh Knitwear Manufacturers and Exporters Association has been kept unchanged at $20 million and $15 million, respectively.

It has been set at $15 million for individual exporters of leather goods and footwear sectors. 

In addition, the maximum eligible limit for bulk imports by a member of the Bangladesh Textile Mills Association has been kept unchanged at $20 million, where it was slashed for a member of the Bangladesh Dyed Yarn Exporters Association to $10 million from $20 million.

"The move is aimed at stopping the fall of the foreign currency reserves," said a central bank.