BB lets foreign firms bring in emergency funds from abroad

The central bank has relaxed regulations for foreign firms operating in Bangladesh such that they can bring in short-term working capital from abroad to tide them over during the pandemic, which has choked off their cash flows.

The move comes after Naoki Ito, the Japanese ambassador to Bangladesh, last month requested the central bank.

The Japanese companies like the local ones have to keep paying salaries of their employees and bear other overhead costs according to local rules and regulations, Ito wrote in a letter to Bangladesh Bank Governor Fazle Kabir on April 29.

"But I have learned that most of them will be unable to continue the payment from May if they cannot find additional fund sources."

The envoy had requested the BB to take necessary measures to permit foreign companies to procure long-term (more than one year) loans with interest for working capital from their parent companies regardless of the duration of their operations in Bangladesh.

According to BB's rules, foreign companies can currently borrow only from their parent companies during the first three years of their operation.

In response, the BB on May 3 issued a notice facilitating the foreign companies to bring in funding from aboard. The loans should be used to meet the actual needs for payment of three months' wages and salaries to the staff regardless of their length of engagement in the manufacturing or services output activities, the notice said.

The facility will not be applicable for those taking loans from the domestic banking system, it added.

"We relaxed the conditions for the foreign companies for the sake of their survival amid the economic fallout of the coronavirus pandemic," said Md Serajul Islam, BB spokesperson.

Salehuddin Ahmed, a former BB governor, said the central bank should remain cautious about the interest rate of the loans and check the background of the companies to see if they would be able to make repayment.

The BB decision to allow foreign firms to borrow from abroad under relaxed conditions will smooth out the flow of foreign direct investment into Bangladesh, said Ahsan H Mansur, executive director of the Policy Research Institute.

But the parent companies of the borrowers should act as the guarantor of the loans, he said.