The Bangladesh Bank has downsized the Export Development Fund (EDF) by $1 billion to $6 billion, and aims at reducing it by another $2-3 billion in the next six months, according to the media report.
Media also reported that the move is a part of the central bank’s plan to phase out foreign currency lending under the EDF, which is built from forex reserves – a development that might upset exporters who have been availing low-cost finance in foreign currency under this fund for over three decades.
The IMF delegation that visited Dhaka in December last to discuss the terms and conditions for a prospective $4.5 billion loan also suggested that the central bank exclude the existing EDF loans from its reserve calculation.
In this perspective, the Bangladesh Bank has decided to phase out EDF lending in foreign currency as the fund cannot be shown in the forex reserves, said a senior executive of the central bank.
The central bank has reduced the outstanding EDF loans over the past one month by speeding up loan recovery and slowing down new disbursement, he added.
Earlier, the IMF in its safeguards assessment of the Bangladesh Bank for 2021 raised objections about showing the EDF in the reserve calculation.