Rein in rumours about EDF

Textile millers yesterday urged all concerned to avoid disseminating any wrong information about the Export Development Fund (EDF) of Bangladesh Bank as the soft loans it provides have helped the sector grow a lot.

There is no scope of taking money away from the EDF as the loans are disbursed only to exporters, who repay the funds from their export receipts with Bangladesh Bank, Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association (BTMA), told reporters at his office in Dhaka.

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A section of people has been disseminating information that certain exporters are taking money away from the EDF even though it is not possible to do so, he added.

So far, there have not been any incidents where money was actually taken away from the EDF, which was launched in 1988 with $300 million to provide soft loan support to exporters.

As of today, the fund is worth $7 billion.

So, both exporters and the central bank are in a state of confusion as there is a rumour of looting money from the EDF as the banking sector has been passing through a volatile situation amid the US dollar crisis and scam incidents, he said.

In some cases, the banks are confused and are showing reluctance to deal with the EDF loan because of the rumour, which may also affect productivity in export-oriented industrial sectors.

Replying to the queries of journalists, Khokon said the inflow of work orders from international clothing retailers and brands has been recovering.

It would have been possible to export $60 billion worth of garment items even in the last six months of the current fiscal year had the dollar and gas crisis not occurred.

With this backdrop, he demanded the government fix the challenges in the textile and garment sectors to facilitate more exports, and remove the dollar crisis.

For instance, if the government spends just $1 lakh on energy imports, the local textile and garment exporters can export $24 lakh worth of products in turn.

So, at the end of year, the export of an additional $10 billion to $12 billion worth of garment items is possible if the energy situation is improved.

Besides, the retention value would be between $3.5 billion and $4 billion, which is much more than the conditional loan from the International Monetary Fund (IMF), Khokon said.

Given the currently volatile local and global economic situation, Khokon demanded the government extend the loan repayment period till June next year so that textile millers need not face any probable loan classification oddity in this critical time.

He also demanded the government introduce measures for paying back EDF loans in US dollars instead of the local currency as the funds are disbursed in the greenback.

Currently, borrowers are required to spend Tk 107 per US dollar to buy the currency from the local market while it costs Tk 99 when they receive it from the central bank.

As a result, a businessman who ships goods worth Tk 1,000 crore is losing Tk 70 crore because of the discriminatory exchange rate between the US dollar and local currency. So, the exchange rate needs to be minimised soon, Khokon added.

Currently, the EDF's borrowing limit for a single exporter in the textile sector is $25 million while it is $14 million for importing the required raw materials with an interest rate of 4 per cent, which is much less than the 9 per cent rate in the conventional banking system.

He said the gas crisis has improved to an extent at textile mills in Gazipur but the situation of gas supply in other industrial areas still remains the same.

Because of the recent slowdown in work orders for garment items from international retailers and brands, the stockpiling of unsold yarn in industrial units has been growing and currently, yarn worth $3 billion remains unsold at the rate of $3.2 per kilogramme.

Recently, the inflow of work orders for knitwear items fell sharply while work orders for woven items increased significantly with the opening up of the global economy from the severe fallouts of Covid-19 and Russia-Ukraine war, Khokon also said.