The Bangladesh Textile Mills Association (BTMA) has requested the Bangladesh Bank to increase the limit of the Export Development Fund (EDF) loan to $30 million and its repayment duration up to 270 days.
The textile millers also sought foreign currency support saying export-oriented manufacturing sectors, especially textile and garment exporters, need greater support to import raw materials including raw cotton, synthetic fibre, dyes and chemicals.
According to the media reports, Mohammad Ali Khokon, president of the BTMA said in press briefing that the EDF contributed a lot towards achieving the current position of the country’s textile and readymade garment exports performance.
Without the facility, it was not possible to sustain the growth by importing raw materials at high-interest rates.
The current limit of the EDF loan for textile millers is $25 million, he said, adding that the central bank can increase this limit to $30 million considering the current business situation.
The size of EDF was only $300 million back in 1988, which now stands at $7 billion, he said.
“About 60% of yarns produced by the local spinners remain stacked, which is worth about $3 billion,” said Khokon, indicating the huge financial burden the sector is facing due to the global economic slowdown.
The tenure of an EDF loan is 180 days while additional 90 days are allowed subject to the approval of the central bank, he said, alleging that many banks are unwilling to extend the duration.
In addition, a borrower now becomes ineligible for further EDF loans if misses an instalment payment of the current one, he said, urging the central bank to extend this eligibility criterion to at least three instalments.
The export-oriented sector, especially members of BTMA, Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), are provided with the loan facility to import raw materials.
After the pandemic hit the country, the central bank extended the EDF loan limit to $30 million from $25 million for members of the BGMEA and BTMA during the pandemic as part of the government’s policy support.
The lean repayment period was also extended to 270 days from 180 days. The special extension facility ended on 31 December 2021.
“The local textile and RMG sectors are experiencing an unusual situation due to high prices of raw materials and crises of energy and the US dollar induced by the Russia-Ukraine war and a declining trend in remittance,” the BTMA president said.
The affected sectors are trying to overcome the challenges by making numerous adjustments, Mohammad Ali Khokon said, alleging that a vested quarter is trying to close the EDF fund in such a situation, saying misuse of the loan.
Textile millers usually import raw materials using the fund. After producing yarn, they sell it to apparel makers. Millers pay back the EDF loan when RMG exporters pay textile millers after receiving their respective export proceeds, he said.
“In some cases, mills fail to repay EDF loans timely as they don’t get payment from apparel exporters in time. But there is no scope to embezzle the money,” the BTMA chief added.