Loans totaling nearly $600 million (Tk 7,000 crore) disbursed from Bangladesh’s Export Development Fund (EDF) have defaulted, according to a document from Bangladesh Bank.

The EDF, which is funded by the country’s foreign exchange reserves, was established to provide low-interest loans to exporters for importing raw materials.

According to Bangladesh Bank data, the bulk of the defaults originated from firms based in Dhaka, which accounted for $558.7 million of the total amount. Companies in Chattogram failed to repay $29.7 million.

Prominent among Dhaka’s defaulters is the Crescent Group. Its subsidiary, Remex Footwear, defaulted on $64.7 million, while Crescent Leather Products and Rupali Composite failed to repay $58.1 million and $51.7 million, respectively.

The Bismillah Group also featured prominently, with Alfah Composite defaulting on $58.1 million, Bismillah Towels on $41 million, and Hindulawali Textile on $14.5 million.

Weak oversight by Bangladesh Bank is cited as a contributing factor, with the central bank reportedly unable to exert sufficient pressure on defaulters. This comes at a time when the country’s foreign exchange reserves are under significant strain, heightening concerns about the stability of the external account.

Attempts to reach Bangladesh Bank Executive Director and Spokesperson Md Mezbaul Haque for comment were unsuccessful.

Other notable defaulters include Linne Fashion, which failed to repay $32.5 million, and SB Exim, which defaulted on $31.7 million. MS SQ Classic and International Knitwear and Apparel also had overdue loans of $27.3 million and $25.2 million, respectively. ESS ES Fashion also defaulted on $25.2 million in loans taken from the EDF.

The central bank established the EDF in 1989 and grew to $3.5 billion after the coronavirus pandemic until April 2020. Subsequently, it was expanded to $7 billion in phases. Previously, the Bangladesh Bank included the amount disbursed from the EDF in its foreign reserve calculations. However, since July 2023, the central bank has reported reserves according to the International Monetary Fund’s (IMF) calculation method.