Kazi Zahidul Hasan :
Bangladesh Bank (BB) has turned down a proposal of the Ministry of Textile and Jute to create a Tk 10,000 crore special fund, similar to Export Development Fund (EDF), for jute sector.
Earlier, the ministry put forward a summary of the proposal to the Prime Minister’s Office (PMO) for its consent in this regard.
The PMO later sent back the proposal to the ministry advising it to take BB’s opinions. Opinions have also sought from Finance Division, Commerce Ministry and the National Board of Revenue (NBR).
In accordance with the PMO advice, the Banking Regulation and Policy Department (BRPD) of BB forwarded its opinion in a letter (July 14, 2017) to the ministry.
Rejecting the ministry’s proposal, the BB opined that the fund could be created from budgetary allocation.
“The EDF at the Central Bank was created to assure a continued availability of foreign exchange to meet the import requirements of non-traditional exporters against back-to-back sight L/Cs. But the EDF is not necessary for jute exporters as they used to procure raw material form local sources,” according to the BB letter.
The government and the Central Bank time to time took initiatives to ensure easy access to credit to productive sectors to expedite their growth. The government usually creates such long-term funds through budgetary allocation and the BB from its own fund.
“BB takes a rigid stance for the formation of a low cost re-financing fund for the jute sector considering its economic consequences. Such a lending practice would directly impact on expanding reserve money in the market and consequently it would push up inflation. A long-term financing to a particular sector is also conflicting to BB’s money policy, it said.
So, the ministry can take alterative path to set the fund,” the BB letter added.
It further said the government has already created Tk 900 crore refinancing fund to compensate small investors hit by the capital market crash. A similar fund could be created from budgetary allocation to ensure easy access to credit for the jute milers and exporters. The Central Bank can act as a fund manager if the government creates the fund.
Officials, however, said that BB’s opinion could put a potential hurdle on the Jute Ministry’s bid to set up a Tk 10,000 crore special fund with 2.0 per cent interest for the jute sector.
They said the ministry had taken the initiative to restore the past glory of jute industry in the country.
Bangladesh usually exports jute to India, Pakistan, China, Nepal, Germany, Korea, Brazil, Djibouti, Russia, Vietnam, Ivory Coast, the USA, the UK, El Salvador, Iraq and Iran.
Bangladesh earned US$167.84 million from exports of raw jute and US$794.58 million from jute goods in the just concluded fiscal year 2016-17, while it earned $173.17 million from raw jute exports and $746.41 million jute goods in the fiscal 2015-16.
