On 14th March (Sunday), the Bangladesh Bank elongated the deadline for the policy facilitation with a view to helping entrepreneurs from damages they have faced induced by the coronavirus pandemic.
The policy support aimed at recovering export earnings and facilitating import payments will be effective for another three months, until 30 June, 2021.
Country’s exports declined 1.45 per cent year-on-year to $25.86 billion in eight months of the current fiscal year as the increase in coronavirus infections continues to decrease demand.
In addition, some European countries, the major destinations for the country’s exported items, are now witnessing another wave of infections.
Under the policy support, time for repatriation of export proceeds is extendable to 210 days from the date of shipment instead of 120 days earlier. However, export proceeds mean foreign exchange received by an Exporter from the proceeds of export activities.
An exporter is obliged to bring in the export income within 120 days after export. But the facility was extended to 210 days last year due to Covid-19. The authorities also decided to keep the facility effective till 31 March this year. This facility will continue till 30 June as well.
For imports, there is an obligation to pay within 180 days. But if the supplier agrees, payments can be made within 360 days. The validity of this facility given last year has also been extended till 30 June.
For importing export-related products using the Export Development Fund, the loan facility was extended from three months to six months.
Again, back-to-back letters of credit (LCs) opened under supplier’s/buyer’s credit are extendable to 180 days more within permissible rate of interest.
According to the BB circular, exporters would get seven months to bring their export earnings until June this year. So as the repayment period for the back-to-back letters of credit (LC) opened under suppliers’ and buyers’ credit facilitation has been extended until June.
Nonetheless, the buyers’ credit refers to the finance for the payment of imports arranged by the importer (buyer) from a financial institution outside of the country.
The suppliers’ credit is the credit extended for imports directly by the overseas supplier instead of a bank or financial institution.
Besides, loan from Export Development Fund (EDF) is extendable to additional 180 days instead of 90 days. In March last year, the central bank enlarged the repayment period for loans under the export development fund (EDF) to six months from three months.
The BB allowed exporters to receive finance from the EDF to adjust their loans under the suppliers’ and buyers’ credits. The support will continue until June as well. The facilitation is scheduled to expire this month, and has been extended until June.
The central bank has extended the policy support as economic activities are yet to get momentum from the pandemic-induced slowdown, a central bank official said.
“The policy supported by the central bank will help the export sector to a large extent,” said Kutubuddin Ahmed, chairman of Envoy Group, a conglomerate with a focus on readymade garments and textile manufacturing.
But there are lots of uncertainties in the export sector as some European countries are facing second and even third waves of coronavirus infections. “This will deal a major blow to exports,” he said.
The export sector has rebounded in recent days, but the spread of infections has again created a barrier to keeping the momentum up, Ahmed said.
AK Azad, managing director of Ha-Meem Group, one of the leading exporters of readymade garments and denim fabrics said businesses might need another stimulus package to help them continue businesses.
At the same time, the BB should consider a new package so that factories, which have been shut, could reopen and ensure jobs for the jobless, he said.
Azad, a former president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), said the central bank should allow a loan rescheduling facility so that borrowers can reschedule loans without any down payment in logical cases.