In addition to the disruption of production in the industrial sector due to the gas and electricity crisis, factories are closing one after another. Employment and the export sector are under threat. However, amidst this uncertainty of energy, 17 banks have initially agreed to provide 41,000 crore taka of the 60,000 crore taka stimulus package of Bangladesh Bank to restart factories that have been closed for many years and revive the stagnant economy. Bangladesh Bank is expected to sign a formal agreement with these banks this week. In the meantime, 37 banks have signed agreements with the central bank to distribute loans under the stimulus fund.
However, industrial entrepreneurs say that providing new financing to closed factories without solving the energy crisis could also pose a risk to banks. Because when operating companies are unable to maintain production due to lack of gas and electricity, there are questions about how feasible it is to reopen factories that have been closed for a long time and continue production.
Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) President Mohammad Hatem said that it is important to sustain the institutions that are currently operating but are on the verge of closure rather than reopening closed factories. Otherwise, the banks will be at risk again. He said that the members of BKMEA have decreased from about 2,000 to about 800 active ones at present. This situation has arisen as factories have been closed one after another. Highlighting the reality of the initiative to reopen closed factories, he said that the attempt to reopen an institution called ‘Green Sweater’, which has been closed for a long time, has not been successful even in the last one year. It is also necessary to take into consideration how it will be possible to quickly reopen the factories that have been closed for many years.
Economists say that initiatives to revive closed industries through low-interest refinancing can have a positive impact on the economy. However, for this, the right selection of institutions, transparency, proper use of loans and strict supervision must be ensured. In addition, it is also important to ensure uninterrupted gas and electricity supply for the industry.
Former Chief Economist of Bangladesh Bank Dr. Mustafa K. Mujeri said, reopening closed factories is relatively profitable. Because these institutions already have infrastructure and equipment. As a result, it is possible to increase production and create employment at a relatively low cost without making new large capital investments. However, he said, the major problem in the industrial sector at present is the gas and electricity crisis. Due to this, many functioning institutions are also closing down. If this crisis is not resolved, there is a risk that any initiative to activate factories will fail.
Bangladesh Bank officials said that to ensure that the stimulus fund is not misused, the distribution and use of loans will be monitored through a dashboard. The central bank will monitor which institutions are receiving loans, whether the institutions are genuine and productive, and whether the loan money is being used for appropriate purposes.
The 17 banks that have agreed to contribute to the stimulus package are Sonali, Agrani, Rupali, BRAC, City, Jamuna, Dutch-Bangla, Mutual Trust, Uttara, Prime, Bank Asia, NCC, Pubali, Eastern, Mercantile, Trust and Southeast Bank. There are allegations that the central bank is forcibly taking funds even though many banks are not interested in contributing money in the ongoing crisis.
Due to the stagnation in investment in the banking sector, the excess liquidity has now exceeded Tk 4 lakh crore. Of this, Sonali Bank has the largest amount. The bank has announced to contribute Tk 20 thousand crore to the stimulus fund. Agrani and Rupali Bank will contribute Tk 2 thousand crore each.
Mutual Trust Bank Managing Director Syed Mahbubur Rahman said, “The most important factors for investment are the availability of gas, law and order situation and political stability. Currently, there is a severe gas crisis in the country; and if there is no gas in the factory, what will entrepreneurs do with just low-interest loans? Without gas, the factory will not run.”
On May 23, Bangladesh Bank announced a stimulus package of Tk 60,000 crore to reopen closed factories and boost the stagnant economy. Of this, Tk 41,000 crore will be provided by commercial banks and the remaining Tk 19,000 crore will be provided from the Bangladesh Bank’s refinancing fund. The largest allocation of Tk 20,000 crore in the package has been set aside for reopening closed factories. The private sector will get loans from this fund at an average interest rate of 7.5 percent.
