FBCCI to seek 2 more years for industries to repay stimulus loans

The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) is set to ask for a two-year extension to repay the working capital loan provided under the government's stimulus package during the pandemic, following a letter from the BTMA in this regard.

The Bangladesh Textile Mills Association (BTMA) sent the letter on 12 October, seeking FBCCI directives on extending the loan facility.

Industrial production has been greatly hampered by the ongoing gas and electricity crisis, prompting the textile sector to seek the extension.

Apart from this, the sector has also sought the facility of paying 25% of the instalments of existing term loans until the current situation normalises.

Mostofa Azad Chowdhury Babu, senior vice president of the FBCCI, told The Business Standard that they had received the BTMA letter, but as all sectors were in trouble, the two-year extension would be sought for those collectively.

Sources in the FBCCI said it will soon send a letter to the Bangladesh Bank and other relevant offices, seeking the facility.

Highlighting the recent gas crisis, the BTMA letter said factory overheads were increasing due to industrial shutdowns of up to 12 hours in many industrial areas.

Fearing that the industry would go into decline, the association has sought policy support from the government to help troubled factories survive.

In 2020, the government had announced Tk73,000 crore in loans at 4.5% interest in two tranches to maintain the momentum of the country's industrial and service sectors after the impact of Covid-19.

Around Tk45,000 crore has been disbursed till the fiscal 2021-22.

The loan was initially supposed to be repaid within a year, but the government later extended it to two years. Many could not settle their debts within that period.

Although the BTMA said it did not have exact figures of how much textile mills had borrowed, Mohammad Ali Khokon, president of the organisation, told The Business Standard that the amount could be Tk5,000 crore, almost half of which had been repaid.

He said the total investment in the textile sector of the country is Tk1.60 lakh crore and the amount of bank loans is about 1.20 lakh crore.

The BTMA president said the loan amount for the first year was paid, but the Russia-Ukraine war and the subsequent intensifying of the gas crisis led to difficulties in paying salaries, utility bills, loan interests, instalment payments and payment of the incentive package.

Economist and Chairman of Brac Bank Dr Ahsan H Mansur said the BTMA demand was not unreasonable, terming the initial one-year repayment period "impractical".

He said four to five years would be needed to pay back the loan. The interest should be paid even if the principal is delayed, he said, adding, otherwise it will put the banks under pressure.

The textile sector has been facing problems for quite some time now.

Stakeholders said a decrease in the demand for clothing in the global market and a fall in demand for yarn had left large stockpiles in many factories.

Although they had bought the cotton at higher prices, they were now forced to sell at an average price of $1.5 less per kilogram.

The gas pressure has also exacerbated the situation.

This week, the BTMA informed many spinning and dyeing mills that they have to remain closed for up to 12 hours.

Ninety percent of factories are facing this problem and if the situation does not improve, 60% of the mills are in danger of closing down in the next few months, the organisation's president said.

The number of member factories of BTMA in the country is more than 1,500. Beyond this, there are many smaller factories, which are not members but produce garments for the local market.