Did the Export Development Fund achieve what it was meant for?
Bangladesh Bank officials acknowledge that misuse of EDF loans and rising forced loans have undermined its credibility
Economists and central-bank officials now admit that the Export Development Fund (EDF) has not delivered the results it promised when introduced to spur export diversification.
"Exporters mainly use the EDF for trading, and it has certainly helped them. But the drastic reduction began when the reserves situation deteriorated and the International Monetary Fund (IMF) required more transparent accounting," said Professor Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD).
"It was working well, but the EDF failed to contribute meaningfully to export diversification. The government should now explore how such funds can be used to promote diversification more effectively," he added.
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Former lead economist of the World Bank Dhaka office Dr Zahid Hussain echoed that the EDF's performance fell short of expectations.
"The main purpose of the EDF was to promote export diversification, but we have not seen visible results. Our export dependence on garments remains unchanged," he told TBS.
"It's time for an evaluation or audit of the EDF to understand why the results have been so limited," Zahid added.
Zahid noted that the fund had not triggered new growth in sectors like leather, agro-processing or light engineering. "Even within garments, the idea was to diversify beyond jeans, sweaters, shirts and T-shirts into higher-value products – but that hasn't happened."
Bangladesh Bank officials also acknowledge that misuse of EDF loans and rising forced loans have undermined its credibility. "Otherwise, Bangladesh Bank could have negotiated more flexibility, as exporters genuinely benefit from this fund. Everyone in the banking sector knows who misused it," said a senior official.
Investigations by the central bank found that some exporters failed to repay EDF loans on time, turning them into forced loans. In one state-owned bank, such loans against EDF credits rose by 410% in 2021 – from Tk1,400 crore to Tk7,141 crore.
"These loans were meant to help exporters earn more foreign currency," said another senior official, "but in many cases buyers abroad failed to make payments, resulting in no export proceeds and growing forced loans."
