Apparel-makers pursue another round of low-cost loans | The Daily Star
12:00 AM, July 17, 2020 / LAST MODIFIED: 01:16 AM, July 17, 2020

Apparel-makers pursue another round of low-cost loans

Tk 7,500cr made available for exporters so far

Pandemic-hit apparel exporters have sought continuation of low-cost loans from the government for three more months to help them pay wages to workers as the sector is struggling to stay afloat.

The Bangladesh Garments Manufacturers and Exporters Association (BGMEA) and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), whose members generate most of the export receipts, jointly wrote to Finance Minister AHM Mustafa Kamal on June 22 as they pursued another round of financing.

The letter was also sent to the principal secretary to the prime minister.

Garment factories in Bangladesh were one of the worst-hit sectors as demand collapsed in Western countries, forcing many international buyers to cancel or suspend orders worth more than $3 billion with local suppliers.

Earnings from apparel shipments in the immediate past fiscal year fell to its lowest in a decade of $27.83 billion. The amount is 18.45 per cent lower than in fiscal 2018-19.

The country's overall export receipts in fiscal 2019-20 fell 16.93 per cent to $33.67 billion. 

The government though has been brisk in its response to stemming the damage done by the unprecedented global coronavirus pandemic.

The export sector has been the first beneficiary for which the government announced a stimulus package to help them ride the crisis brought on by the pandemic.

On the eve of Bangladesh embarking on a countrywide shutdown on March 26, the government announced a Tk 5,000-crore special package for to pay the wages and allowances of export-oriented industries' workers for three months starting from April.

The export-oriented industries are dominated by garment factories. As the fund was later found to be inadequate, the government released another Tk 2,500 crore from the Tk 30,000 crore bailout package rolled out for the large industries affected by the pandemic.

Banks disbursed the amount directly to the workers' bank accounts or mobile financial service accounts.

The borrower enterprises were to repay the loans in 18 instalments over two years, which include six months as a grace period.

The interest-free loan carried a 2 per cent service charge.

Garment factory owners are in deep worry about carrying out various activities, the future of the industry and how to pay wages to the workers, the joint letter said.

"As a result, it would not be possible for most garment factory owners to pay wages to workers for July, August and September."

The stimulus package helped the garment sector withstand the crisis, the letter said.

Garment factories in Bangladesh were closed because of the shutdown imposed to stop the spread of the coronavirus pandemic, the BGMEA and BKMEA said.

Besides, the garment sector has been under a debacle because of the situation caused by the coronavirus pandemic. As a result, many factories are closing. International brands and retailers are increasingly cancelling orders.

The garment sector is facing a financial crisis because of the cancellation or suspension of orders by the buyers and delay in payment, according to the letter. 

"It may take up to eight months to get the payment for the shipment already made," the letter said.

Workers have to be paid to keep factories up and running to execute the current shipments and make the delivery for the orders coming in, the two trade bodies said.

The funds should be given on easy terms like the government previously released, the letter said.

Contacted, Mohammad Hatem, vice-president of BKMEA, said the garment exporters did not state any particular sum in the letter.

"We only said that we need another package. We do not have an adequate inflow of work orders from our international retailers and brands. So we demanded financial support from the government so that we can overcome our challenges," Hatem told The Daily Star over the phone.

With the current flow of work orders, many will not be able to pay the wages and allowances.

"So we need another financial package," he added.

Rubana Haq, president of the BGMEA, could not be reached for comments.

Meanwhile, the private jute millers have also sought funds from the government.

If the government wants to meet the financing requirement of both the garment and jute sectors, it would need Tk 8,000 crore to Tk 9,000 crore, said an official of the finance ministry. 

The finance minister is now abroad and a final decision would be taken when he returns.

However, the government may not entertain the requests for funds as it is facing financing shortfall of its own caused by a drastic fall in revenue incomes.

The revenue target for the National Board of Revenue was Tk 300,500 crore in the revised budget of last fiscal year.

The final figure is not available yet but officials hinted that they might be able to earn Tk 220,000 crore to Tk 222,000 crore in the end.

"The government is likely to face a severe revenue crunch this fiscal year, as it did last year," according to Zahid Hussain, a former lead economist of the World Bank office in Dhaka.

It was not much keen to release the Tk 2,500 crore, said a finance ministry official.

The government would sit with the central bank to discuss the issue, said Salman F Rahman, private industry and investment adviser to the prime minister, at a programme in Dhaka yesterday.

 

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