Import letters of credit (L/Cs) for Bangladesh's manufacturers to buy materials for exportable products look set to become more available as a result of an improved facility announced by the central bank.

Bangladesh Bank (BB) has increased its allocation for the Export Development Fund (EDF) by 20 per cent from US$1.0 billion to US$1.2 billion to meet growing demand from the country's exporters.

Back-back L/Cs

This makes extra funds available for EDF financing, which is offered for input procurement against back-to-back import L/Cs or inland back-to-back L/Cs in foreign exchange.

The facility can be used by manufacturers producing final output for direct export or their suppliers, provided they are based in Bangladesh and require imports to meet the demands of the exporting manufacturer.

Loss recovery

The central bank's move follows its decision in December 2013 to reduce the cost of foreign currency loans under the EDF facility from a rate of Libor plus 2.5 per cent to 1.5 per cent.

The BB cut these rates to help exporters recover losses caused by political unrest late last year.

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