The Bangladesh Bank has announced it will further ease the policy for private sector foreign borrowing following the approval of an $80 million loan for Meghna Group, aiming to encourage businesses to access cheaper overseas funds as an alternative to high-cost local loans.
“Current business loan interest rates in the country range between 12 and 14 percent. If loans can be obtained from foreign sources at 5 to 6 percent interest, entrepreneurs will be encouraged to take them,” said Governor Mostaqur Rahman during a press conference after announcing the monetary policy on Tuesday.
The governor said a new circular will be issued very soon to simplify the process. The central bank is also considering removing the requirement of prior approval for borrowing from foreign parent companies, though the central bank must be informed afterwards to avoid repayment complications.
The announcement comes after the Bangladesh Bank on 15 June approved Meghna Group’s $80 million loan from the International Finance Corporation (IFC) for purchasing four ships, carrying an interest rate of 6.62 percent with a two-year grace period.
The application had initially been rejected over concerns that a large dollar loan for an import-dependent conglomerate could create repayment risks if the exchange rate became unstable. However, following a reconsideration request, the central bank reversed its decision and approved the loan.
Asked about exchange rate risks, the governor acknowledged the risk certainly exists. However, with reserves exceeding $37 billion and the exchange rate relatively stable, the central bank does not foresee major short-term risks.
“The risk is certainly there, but the current situation is different from 2022 when we took a highly cautious stance after the taka’s significant depreciation,” he said.
