Stimulus packages

Central bank mulls easing repayment

Bangladesh Bank (BB) has started working to extend the repayment tenures of different incentive or stimulus packages announced by the government to overcome the impact of Covid-19 pandemic that cast a severe blow to the country's economic activities.

The central bank has recently been informed of such a decision from the higher level of the government, sources said.

Considering a prolonged impact of the second wave of the prevailing Covid-19 pandemic, BB is also thinking these issues positively and it has already sent letter to all commercial banks and financial institutions seeking information in details about the implementation position of various incentive packages, said a central bank source.

"We have started working on the issue . . . our departments concerned have already prepared a draft report for extending the tenures of the incentive packages in line with the government's instruction," said chief spokesperson of Bangladesh Bank Sirajul Islam.  

He said BB will take final decision immediately after getting information from the commercial banks.

According to sources, 31 incentive packages have been announced so far to provide financial and policy support to revive the country's economy hit hard by Covid-19 as the government declared general holiday from March 17, 2020 to contain the spread of coronavirus in the country.  

Of these packages, 10 are low-interest loan-based incentives and the remaining 21 are policy support-based ones.

The first incentive package was announced with a fund of Tk 5,000 crore for the payment of salary and allowances to workers and employees of export-oriented industries.

Later, the size of this fund was enlarged by Tk 3,000 crore more increasing the total package to Tk 8,000 crore. The loan is to be repaid through a total of 18 equal instalments, including a grace period of six months, in the first two years.

Service charge at the rate of 2 percent will have to be paid against the loan. However, six months have been passed. According to the rules, the instalment payments in this regard are expected to be started from the current month.

But Bangladesh Garment Manufacturers and Exporters Association (BGMEA) demanded an extension of the loan repayment period to five years from the existing two years arguing that the apparel sector has not yet been able completely to cope up with the negative impact of corona.

Besides, the export activities are being hampered again due to the second wave of the Covid-19, the BGMEA said.

Talking to the Bangladesh Post, BGMEA President Dr Rubana Huq said BGMEA raised to extend the grace period for at least one year but no decision was taken till now and banks have already started cutting the service charge.

"We are worried about it . . . . Covid-19 has hard the garment sector and factories are still struggling to cope with the situation. Factories which will not be able to pay the charge will face closure and employees loss jobs," she said, and repeated BGMEA's demand for extension of the grace period for one year.      

But no decision has yet been taken by the government in this regard as the matter is now under review of the authorities concerned. However, it has been informed that the loan repayment period may be extended for a short period of time.

A fund of Tk 30,000 crore was formed to provide working capital to large or big industries and the service sector. The fund's size was further increased in two phases to a total of Tk 40,000 crore. Entrepreneurs are being given loans at 4 percent interest rate from this fund and around 95 percent of this package has been implemented so far. The deadline to implement the fund has been extended till June this year.

An incentive package of Tk 20,000 crore has been announced to provide working capital to cottage, small and medium industries and entrepreneurs are being given loans at the interest rate of 4.5 percent from this fund.

The implementation period of this fund has already been extended till next March, BB sources said. But BB is considering to extend the tenure of this fund till June this year as the implementation rate till last December was only 50 percent.

The size of the Export Development Fund has been increased from US$350 crore to US$500 crore to import raw materials for export-oriented industries. The interest rate of the loan of this fund has been reduced to 1.75 percent in two phases and loan facility will be available up to March 31 this year.

But due to the prolonged effect of the coronavirus pandemic, the tenure of this fund is expected to be extended till June this year, BB sources said.

A fund of Tk 5,000 crore has been set up for pre-shipment loans for export-related product shipments. The loan is being given at 6 percent interest from this fund. This is a rotating or revolving fund so it will continue further.

To cope with the negative impact of Covid-19 in the agricultural sector, loans are being given to farmers at 4 per cent interest rate though the actual interest rate is 9 percent.

The farmers will give 4 percent while the remaining 5 percent will be subsidised (as subsidy interest) by Bangladesh Bank to commercial banks.

A separate fund of Tk 5,000 crore has been formed to provide loans to the agro-based industries. Entrepreneurs are being given loans at 4 percent interest from this fund. But as the loan disbursement rate is very low, the BB is considering extension of the loan disbursement tenure till June this year.

Under a special incentive package for remote hilly areas, loans are being given to general farmers and Jhum (slash-and-burn agriculture) farmers at 4 percent interest rate in the three hill districts--Bandarban, Rangamati and Khagrachhari -- in Chattogram Hill Tracts (CHT). This loan will be given to farmers till next June.

The central bank has increased its Tk 200 crore fund to Tk 400 crore to finance the implementation of environment-friendly industrial projects. From this fund, entrepreneurs are able to take loans for production of environment-friendly products. At the borrower level, the interest rate of the loan will be 7 to 8 percent and it will continue further.

A fund of Tk 3,000 crore has been set up to provide loans to micro-entrepreneurs and farmers. From this fund, loans will be given through Microfinance Institutions and small entrepreneurs and farmers will get loans from this fund at 9 percent interest rate. Almost 80 percent of this fund has already been used and BB is considering to extend its tenure till June this year.

A fund of 20 crore Euros has been set up to provide low-interest foreign currency loans to the country's industrial entrepreneurs. Only entrepreneurs in the manufacturing and export sectors will get long-term loans from this fund. The term of the loan will be 5 to 10 years while the interest rate will be 2 to 3 percent. Loans will be available from this fund for converting existing factory into a green factory.

The same sector has a US$20 crore fund for green conversion. Manufacturers and exporters can also borrow from this fund in dollar and both funds will continue further.

The government has set up a fund of Tk 2,000 crore to provide loans through specialised banks and financial institutions.

From this fund, loans (at 5 percent interest) are being given to the victims who had suffered the adverse effect of corona pandemic.

Already 50 percent of this stimulus package has been implemented and initiatives have been taken to implement the rest by June next.