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The central bank has reduced the cash incentive rate for 43 export-oriented sectors as part of the country’s preparation for LDC graduation in 2026.
In a circular issued on January 30, the regulator further stated that the new incentive structure will be effective retrospectively from January 1 this year.
Although the central bank made the decision on Tuesday, the former finance minister AHM Mustafa Kamal had said in his FY24 budget speech that the government will gradually reduce cash incentives as per the LDC graduation preparation.
When a country graduates from LDC, they cannot allow incentives as per the WTO rule. That means, Bangladesh’s exporters will not be eligible for incentives after 2026.
Though economists welcomed the decision, industry insiders say the new policy disappointed them. They added that the policy of reduced incentives has reduced their competitiveness in the global market.
Industry leaders are planning to write to the government seeking a review of this move.
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President and Giant Textiles Ltd Managing Director Faruque Hasan said, “We urged the government to continue this incentive until 2026, and adapt to a new policy to support the export-oriented sector.
“But the government did not take our demand into consideration. The government also kicked out three non-traditional markets from the incentive policy, where we are doing well. The move will severely affect our export earnings in the coming days.”
As per a latest circular of the Bangladesh Bank, the government has decided that the incentive facility available to 43 export-oriented products will gradually be decreased within June 2024.
The crust leather sector witnessed a 10 per cent reduction in incentives, which is 3 per cent in finished products, 10 per cent in vegetables, 10 per cent in export-oriented furniture, and 3 per cent in manufactured paper. Incentives have gone down in more than 38 sectors as well.
