Biannual 0.5% cash aid drop for Bangladesh RMG sector: Reports

Media reports claimed this adding this initiative, outlined in the Finance Ministry’s roadmap effective since January, will gradually diminish export incentives for all sectors by a third annually until their complete cessation in 2026.

To mitigate the impact of reduced cash support, alternative measures are proposed, including up to 10 per cent electricity tariff waivers, exemption of licensing fees, and import of capital machinery and spare parts at a maximum 1 per cent duty.

Furthermore, export oriented industries will be offered low-interest loans and tax breaks for green energy and effluent treatment plants, as per the Commerce Ministry’s policy draft.

As the largest export sector, RMG has historically enjoyed substantial cash benefits, making it vulnerable to the forthcoming changes. The Bangladesh Bank, central bank of Bangladesh, has already initiated the roadmap’s implementation, reducing cash incentives from 4 per cent to 3 per cent for RMG exporters in January, affecting 43 sectors overall.

Meanwhile, concerns linger among industry leaders regarding the withdrawal of cash incentives, emphasising the need for government substitutes to sustain competitiveness post-LDC graduation even as industry analysts acknowledged the inevitability of phasing out cash support under WTO rules but stressed the importance of robust alternative policies.

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