BGMEA wants single-digit bank interest rates

Garment exporters today recommended to the central bank governor that export loan interest rates be brought down to single digits and that easier loan conditions be provided for small and medium enterprises (SMEs).

They emphasised that if incentive funds are not released promptly and regularly, many factories may soon be forced to shut down, which would negatively impact the labour market, according to a statement from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

In a meeting with Bangladesh Bank (BB) Governor Md Mostaqur Rahman at his office in Dhaka, BGMEA leaders said that due to liquidity shortages, many factories are struggling to pay workers’ wages and utility bills, including electricity.

BGMEA President Mahmud Hasan Khan, who led the business delegation, stated that due to instability in the global economy and various domestic constraints, the country’s garment industry is currently going through a difficult period.

The leaders strongly urged the continuation and enhancement of policy support measures, particularly an increase in cash incentives, to help safeguard the industry during this critical period and encourage the emergence of new entrepreneurs.

The delegation proposed increasing the special cash incentive rate from 0.30 percent to 1 percent, raising the alternative cash incentive rate (in place of bonded warehouse and duty drawback facilities) from 1.5 percent to 2 percent, and increasing the incentive for SMEs from 3 percent to 4 percent.

They also proposed reducing the interest rate on packing credit (PC) to 7 percent, increasing the Pre-Shipment Credit Refinance Scheme from Tk 5,000 crore to Tk 10,000 crore, and extending the tenure of this fund until 2030.

Although many banks have rescheduled loans, they are not providing the necessary working capital, which is hampering both the smooth operation of factories and the timely repayment of loans.

The central bank governor assured that effective measures would be taken on matters within the jurisdiction of the BB, according to the BGMEA statement.

Regarding cash incentives, he firmly stated that no application will remain pending from now on and that, to ease liquidity constraints for exporters, arrangements will be made to disburse monthly cash incentives within the same month.

During the meeting, the delegation also raised the issue of difficulties in encashing fixed deposits and export proceeds held in several consolidated Islamic banks, including former EXIM Bank and First Security Islami Bank.

The BGMEA delegation expressed hope that these swift measures by the central bank would help the garment sector overcome current global challenges, recover its momentum, and sustain employment.

The delegation sought urgent intervention from the central bank to help resolve the multifaceted challenges currently facing the readymade garment sector and presented several specific proposals.