Yet another round of low-cost funds on the cards for garment exporters

The government may consider another stimulus package for garment exporters such that they can pay workers' wages of August, said Finance Minister AHM Mustafa Kamal yesterday.

"I received a letter from the garment manufacturers and exporters for another stimulus package," the minister said at a meeting at his secretariat in Dhaka.

Kamal, however, said it was difficult for him to take such a decision because the issue of giving the stimulus package to the exporters depends on the consent of the prime minister.

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

As the fund was later found to be inadequate, the government released another Tk 2,500 crore from the 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 interest-free loan carried a 2 per cent service charge.

Then on 22 June, 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 Kamal seeking continuation of low-cost loans for three more months to September.

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, said the joint letter, which was also sent to the prime minister's principal secretary.

"As a result, it would not be possible for most garment factory owners to pay wages to workers for July, August and September," the letter said, adding that the initial stimulus package had helped the garment sector withstand the crisis brought on by the global coronavirus pandemic.

Garment factories in Bangladesh faced order cancellations or suspensions worth more than $3 billion since the pandemic took form.

Subsequently, earnings from apparel shipments in the immediate past fiscal year fell to its lowest in a decade of $27.8 billion. The amount is 18.5 per cent lower than in fiscal 2018-19.

It may take up to eight months to get the payment for the shipments already made. But the 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.

In response, the government in July gave yet another stimulus package worth Tk 3,000 crore for the export-oriented industries to help them provide wages and salaries to their workers for the month.

Borrowers will have to pay 4.5 per cent interest rate to avail the fund while banks will get 9 per cent interest as the government will give the rest as subsidy.

Banks will be permitted to take up 50 per cent fund from the central bank's refinance scheme to provide the credit to the export-oriented industries smoothly.

Borrowers will have to pay the loans within two years including a grace period of six months.

Now, the exporters are seeking another round of low-cost funds to pay the wages of August, although shipments are on the rise.

Garment shipments raked in $3.2 billion in July, which is 14.1 per cent more than the target set by the commerce ministry for July. In July last year, apparel exports stood at $3.3 billion.

"We have asked for soft loans like before to pay the wages of August," said Md Shehab Udduza Chowdhury, a director of BGMEA.

The garment exporters need the loans as many of them are struggling to hold out against the economic onslaught of the pandemic, he said.

"We also sent a letter to the finance minister seeking loans at a 2 per cent service charge," said Mohammad Hatem, vice-president of BKMEA.