Bangladesh has reduced cash incentives for exports by up to 50 per cent on 43 products for the financial year 2024-25, beginning July 1.
In a circular issued on June 30, the Bangladesh Bank announced the government’s decision to gradually decrease cash incentives for exports.
This move is in preparation for the country’s upcoming graduation from least developed status in 2026, when export subsidies will no longer be allowed under World Trade Organization provisions.
Starting July 1, incentives across all sectors, including crucial industries such as readymade garments, leather goods and agriculture, will undergo significant reductions.
Earlier, on January 30th, the Bangladesh Bank had issued circular lowering cash incentives for exports in 43 product categories for the financial year 2023-24.
Policy makers have frequently clarified that, in anticipation of potential challenges for the export sector post-graduation, the Bangladesh Bank has chosen to proactively lower incentive rates across different sectors.
This strategic adjustment aims to mitigate the impact of upcoming changes and maintain export competitiveness in the evolving economic landscape.
Exporters have expressed opposition to the government’s decision, arguing that amidst global economic challenges, reducing cash incentives could undermine the competitiveness of Bangladesh’s export sectors.
According to the BB circular, additional incentives for RMG products made with local yarns and fabrics were reduced by half to 1.5 per cent and cash incentives against exports to the Eurozone were decreased from 3 per cent to 0.5 per cent.
Special cash incentives for exports of readymade garment products were reduced to 0.3 per cent, and export subsidies for new markets were also decreased from 3 per cent to 2 per cent.
The circular specified that readymade garments made from man-made fibers would be eligible for this incentive on either new products or new markets.
The apex apparel body – Bangladesh Garment Manufacturers and Exporters Association has recently urged the government for the continuation of cash incentive until 2029 to keep economic growth and employment intact.
As per the BB circular, cash incentives for exports of leather products were reduced from 12 per cent to 10 per cent.
Exports of diversified jute products will receive a 10 per cent cash incentive instead of 15 per cent, jute yarn and twine will enjoy 3 per cent instead of 5 per cent, and jute hessian, sacking, and carpet backing cloth will receive 5 per cent instead of 7 per cent incentive.
Information technology-enabled services will receive a 6 per cent cash incentive, reduced from 8 per cent.
Exporters of frozen fish will receive 3.5 per cent cash incentive for products covered with ice weighing up to 20 per cent of the total weight, 2.5 per cent cash incentive for products covered with ice weighing 20 to 30 per cent of the weight, 2 per cent cash incentive for products covered with ice weighing 30 to 40 per cent of the weight and 1.5 per cent cash incentive for products covered with ice weighing 40 per cent and above of the weight.
Exporters of shrimp will receive 8 per cent cash incentive for products covered with ice weighing up to 20 per cent of the total weight, 7 per cent cash incentive for products covered with ice weighing 20 to 30 per cent of the weight, 6 per cent cash incentive for products covered with ice weighing 30 to 40 per cent of the weight and 4 per cent cash incentive for products covered with ice weighing 40 per cent and above of the weight.