Dhaka:
Bangladesh Bank announced a 60,000 crore taka (about US$5 billion) stimulus package on Saturday to restart closed factories, lift farm output, expand exports and create jobs, with borrowers paying seven percent interest under a government subsidy.
Commercial banks will provide 41,000 crore taka of the package and the central bank will refinance the remaining 19,000 crore taka, Governor Mostakur Rahman told a news conference at the central bank’s conference hall.
Borrowers will pay seven percent interest on the loans, with the government covering a six-percent interest subsidy, Rahman said. The package was expected to create more than 2.5 million jobs, he said. (1 crore = 10 million; 1 lakh = 100,000.)
Rahman said the country’s economic growth had declined steadily over the past three years. Gross domestic product growth had fallen from 5.8 percent to 4.2 percent and was now estimated to stand at 3.7 percent, he said. Garments, textiles, ceramics, information technology and manufacturing had all taken heavy blows, he said.
Stress on the banking sector had increased, non-performing loans had risen, money laundering had occurred and depositor confidence had fallen, the governor said. High interest rates were discouraging small and medium-sized entrepreneurs from expanding their businesses, he said. The new scheme was designed to revive the economy, he added.
Sector-by-sector allocations
Of the 41,000 crore taka refinancing fund, 20,000 crore taka has been allocated to closed industrial factories and the service sector, Rahman said. The cottage, micro, small and medium enterprise (CMSME) sector will receive 5,000 crore taka, agriculture and rural economic activity 10,000 crore taka, export diversification 3,000 crore taka, and 3,000 crore taka has been set aside to develop northern Bangladesh as an agricultural hub.
The central bank’s 19,000 crore taka fund includes 5,000 crore taka in pre-shipment credit for the export sector. Cottage, micro and small entrepreneurs will receive 5,000 crore taka, leather and leather products 2,000 crore taka, jobs for unemployed youth 1,000 crore taka, rural economic activity 1,000 crore taka, frozen fish and fish exports 2,000 crore taka, green investment 1,000 crore taka, overseas employment 1,000 crore taka, startups 500 crore taka and the creative economy 500 crore taka. The 500 crore taka for the creative economy will be spent by the central bank under its corporate social responsibility programme.
Asked how the central bank would prevent the misuse of loans that plagued earlier stimulus packages issued during the coronavirus pandemic, Rahman said tight controls had been imposed. “Earlier we saw that one group was taking a lot of the money,” he said. “That kind of opportunity is not there this time. We are not going to face the bad experience of the past. Wilful defaulters will not have access to this fund.”
The central bank’s role in the scheme would be primarily as a refinancier, Rahman said. “The bank will lend only when it is confident that the customer genuinely qualifies for the loan, and the refinance facility will then be provided against that loan,” he said. The government’s contribution was limited to the six-percent interest subsidy, he said, adding that the package would be funded from within the banking sector and would not require any new money to be printed.
Rahman said five lakh crore taka had been stolen from the banking sector. “Politely we call it bad loans. In fact it is not bad loans. This stolen money has been laundered out of the country,” he said. Recovering the money would take time because most of the stolen assets lacked proper documentation, he said. The government was treating recovery as a top priority and was preparing a Money Court law to speed up the process, he said.
Asked about an increase in the single-borrower exposure limit, the governor said the taka had lost about 40 percent of its value against the dollar and that international commodity prices had also risen. Loans of the size previously needed to sustain a company’s production capacity were no longer sufficient, he said. The limit had been raised accordingly, but banks would still distribute the loans on the basis of their own due diligence and risk assessments, he said.
Rates and eligibility
Rahman said the central bank would collect funds at 10 percent interest from banks that held excess liquidity. The government would absorb six percentage points of the cost as a subsidy and the central bank would absorb the remaining four. Borrowers would pay seven percent interest.
বাংলায় মূল প্রতিবেদন পড়ুন · Read the original Bengali report