The Prime Minister of Bangladesh has announced relief packages to help industries in continuing their business smoothly. The total value of the package is BDT 727.5 billion ($ 8.6 billion) which is 2.52% of the GDP of Bangladesh.
The breakdown of the packages is mentioned below:
- BDT 50 billion ($ 588 million) to pay the salaries of the employees and workers of export-oriented sectors (minimum 80% of production must be exported). The fund will be loaned to the companies by the commercial banks at 2% one-time service charge. The fund will be mobilised through Mobile Financial Services e.g. bKash, Rocket etc. The loan must be paid within 2 years with 6 months grace period.
- BDT 300 billion ($ 3.53 billion) for affected large industries and service sectors. The amount will be provided only as a revolving working capital loan at 9% interest. The companies have to pay 4.5% interest; the remaining 4.5% will be subsidised by the government
- BDT 200 billion ($ 2.35 billion) for small, medium, and cottage industries at 9% interest. The companies have to pay 4.0% interest; the remaining 5.0% will be subsidised by the government
- The size of the Export Development Fund (EDF) which is used to facilitate raw materials import under back-to-back LC has been increased from $ 3.5 billion to $ 5.0 billion. The EDF rate has been reduced from Libor+1.5% (~2.73%) to flat 2.0%
- BDT 50 billion ($ 588 million) as a new credit facility called “Pre-shipment Credit Refinance Scheme” at 7% interest rate
The central bank also has taken a few initiatives to help fight COVID-19. The steps are mentioned below:
- 25bps reduction in Repo rate (from 6% to 5.75%) 50bps reduction in CRR (from 5.5% to 5%); will inject about $ 750mn in the economy
- No change in SLR
- No bank or NBFI loan could be downgraded to defaulted until June 30 if borrowers fail to repay instalment
- The banks which have rescheduled loans according to the new rescheduling policy will be allowed to keep 50% of the provision required
- The monthly transition limit using mobile financial services (MFS) has been increased to BDT 200,000 from BDT 75,000 and no charge will be applied for P2P transfer
- Clients will not fork out any charge for cashing out BDT 1,000 per day
- Merchants will not be charged for settling transactions of BDT 15,000 daily and BDT 100,000 monthly while selling medicines and other essential goods if clients use debit or credit cards for payment
- Transaction limit using contactless debit and credit cards rose to BDT 5,000 per day from BDT 3,000 previously
- The central bank instructed banks to extend the tenure of realising export proceeds from four months to six months. Similarly, Bangladeshi importers have been given more time to make import payments. The tenure was extended to six months from existing four months. The BB also increased the repayment tenure of loans, which were given out from the central bank›s Export Development Fund, from three months to six months. The period of back to back letters of credit opened under suppliers and buyers› credit has been extended up to a year from six months currently.
The central bank will inject fresh fund through purchasing government securities directly from the banks to avert any unwanted liquidity satiation stemming from the coronavirus pandemic. As per the latest decision of the Bangladesh Bank (BB), interested commercial banks, as well as non-banking financial institutions (NBFIs) may sell their excess securities after complying with the statutory liquidity ratio (SLR). Banks can accept advance payments of up to $ 500,000 (previously set at $ 10,000) from businesses seeking to import COVID-19-related life-saving drugs and essential medical items, including kits and equipment.
The usance period for industrial raw materials can be increased up to 360 days from 180 days and the usance period for live saving drugs can be increased up to 180 days from 90 days. Foreign nationals can now remit 75% of their bonus at one go. Previously, the bonus amount needed to be spread over 12 months.
Moreover, Bangladesh is expecting $ 2.6 billion in loans as emergency budget support from five development partners to tackle the COVID-19 situation. The details of the support are as follows:
- World Bank: $ 850 million
- International Monetary Fund (IMF): $ 750 million
- Asian Development Bank (ADB): $ 600 million
- Asian Infrastructure Investment Bank (AIIB): $ 250 million
- Islamic Development Bank (IsDB): $ 150 million
The fund from the World Bank, AIIB, and IsDB are already approved. Discussions with IMF and ADB are underway and it is highly probable that Bangladesh will be able to obtain the requested amount from these two agencies, as both IMF and ADB have already declared packages of $ 50 billion and $ 6.5 billion respectively to fight COVID-19. Bangladesh is also in discussion with Japan International Cooperation Agency (JICA) for assistance in fighting the COVID-19 situation.