The interim government has extended the much-talked-about export incentive regime by about 11 months amid pressure from businesses and the reciprocal tariff by the United States.
Besides, the recent restrictions on the entry of certain Bangladeshi products, including readymade garments, through land ports by India prompted the government to deviate from the original plan to phase out the cash incentive by January 2026, said finance ministry officials.
Economists said that the delay in phasing out cash incentives would give some relief to businesses but would not give any guarantee for a smooth transition of the LDC graduation.
The introduction of a single window and digitization for ease of doing business will be the key to meeting the challenge of transition, said Centre for Policy Dialogue distinguished fellow Mustafizur Rahman.
He said that Bangladesh would not be able to provide cash incentive for exports because of its graduation from the block of least developed countries from November 26, 2026.
The World Trade Organization agreement on subsidy and countervailing measures does not permit an LDC graduate country to provide cash incentive to its exports.
The overall amount of cash incentives provided by Bangladesh for exports almost doubled to Tk 7,830 crore in the concluding financial year of 2024-25 from Tk 4,000 crore in FY2018-19 as businesses of different sectors demanded and received cash incentives to strengthen their export performance.
Finance ministry officials said that two phases, out of the four as part of the phasing out cash incentive regime, had already been implemented over the past one year.
The third phase is scheduled to be implemented from July 1, 2025 while the fourth and final phase would take effect in January 2026.
But pressure from businesses, the reciprocal tariff by the United States, and the trade tension with India have, meanwhile, led the Finance Division to suspend the implementation of the third phase until December this calendar year.
Similarly, the implementation of the fourth phase will remain suspended until November 24, 2026, just two days before the official exit from the LDC block, said finance ministry officials referring to an approval given by finance adviser Salehuddin Ahmed in this regard in the past month.
On April 3, the US imposed a steep 37 per cent tariffs on Bangladeshi exports, raising concerns about the country’s resultant economic fallout and trade competitiveness.
Since May 18, India has imposed import restrictions on certain goods from Bangladesh through its land ports. New Delhi imposed a complete ban on import of readymade garments through any land port, with the exceptions only through the seaports of Nhava Sheva and Kolkata.
India and many countries providing zero tariff facility to Bangladeshi exports may not continue the policy after Bangladesh’s graduation that according to economists raises concerns for the country
Economists said that the policymakers of the present government should pursue European Union countries, China, and Japan to implement their commitment to maintaining zero tariff for Bangladesh even after its LDC graduation.
Research and Policy Integration for Development chair Mohammad Abdur Razzaque said that the country’s upcoming graduation from the LDC block would hinder export growth, particularly in sectors like RMG.
RMG is the mainstay of the country’s exports, accounting for over 80 per cent of the annual income from the exports.
The sector is also the main beneficiary of the cash incentive regime that began on a limited scale way back in 1994 to give impetus to the sector.
The incentives helped them remain competitive on the global market.
But things will not be the same in the next year with the LDC graduation, said M Masrur Reaz, chair of the Policy Exchange Bangladesh.
Noting that a smooth LDC graduation is more linked to implementation than planning and research, Masrur said that the present government seemed busy with the former.
