[🇧🇩] Monitoring Bangladesh's Economy

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Challenges to achieving the export target

Setting the annual target of exports is a tradition for long in the country though there is no official target for imports. As earnings from export is an important source to support the country's balance of payments (BoP) as well as the economic growth, the strategic target of annual export is cons

thefinancialexpress.com.bd

Challenges to achieving the export target

Asjadul Kibria
Published :
Aug 17, 2025 00:37
Updated :
Aug 17, 2025 00:37

Setting the annual target of exports is a tradition for long in the country though there is no official target for imports. As earnings from export is an important source to support the country's balance of payments (BoP) as well as the economic growth, the strategic target of annual export is considered as a benchmark to determine the performance of the export-oriented industries. Following the tradition, after a modest rise in exports in the last fiscal year, the interim government has set a double digit growth target in earnings from exports of goods and services for the current fiscal year (FY26). The target for merchandise exports is set at US$55 billion for FY 2026 against the actual earnings of $48.28 billion in FY25 when the target was $50 billion. The target for services exports set at $8.50 billion against the target of $7.50 billion in the last fiscal year. Thus, the overall exports target is set at $63.50 billion for the current fiscal year.

After a decline in two consecutive fiscal years, exports of goods surged by 8.50 per cent in the last fiscal year indicating a modest rebound in the economy despite a massive political unrest and changeover in the country. The first quarter of FY25 passed through a sluggish economic activity due to student-led mass uprising in the country that led to downfall of the authoritarian regime of Hasina on August 5 last year. Nevertheless, receipts from exports of goods stood at $11.65 billion in the first quarter which increased to $12.88 billion in the second quarter of the last fiscal year. The third quarter, however, witnessed a slight drop of exports to $12.65 billion and the last quarter ended with the lowest quarterly earnings of $11.12 billion in FY25.

When the domestic economic condition started to rebound, the return of external turbulence did cast a shadow on export growth. In April, Donald Trump, president of the United States (US), announced his reciprocal tariff policy and imposed high rate of tariffs on various trading partners. On Bangladesh, he imposed 37 per cent tariff making the exports from the country excessively costly. The initial reciprocal tariffs were, however, suspended for three months as Trump administration provided a room for negotiation. After a hectic negotiation along with offering a number of benefits, the US has finally agreed to impose 20 per cent reciprocal tariff on all the imports of Bangladesh. It means, the country has to pay 20 per cent additional duty on the existing duties on different products. The tariff blitz has shocked the world and exports from the different countries to the US market also suffered. Bangladesh's export to the US also dropped slightly to $2.35 billion in the last quarter of FY25 from $2.52 billion of the third quarter.

Now, the new export target for FY26 is around 14 per cent higher than the actual earnings of the last fiscal year. The government is optimistic that lower reciprocal tariff will help maintain the exports to the US market. Moreover, the higher reciprocal tariffs on competitors like India will be a boon for Bangladesh.

There is a reason to be slightly optimistic about the global trade, as per the World Trade Organization (WTO). The economists of the WTO at the latest update of the trade forecast said that global merchandise trade is to grow 0.9 per cent in 2025, up from the 0.2 per cent contraction forecasted in April. The latest projection of tiny trade growth is, however, significantly down from the 2.7 per cent growth estimated before the Trump's tariff blitz.

Two factors drive the WTO to make a modest growth projection for the current year. First is the surge of the US imports in the first half of 2025 by 11 per cent in terms of volume due to 'frontloading and inventory accumulation.' Simply put, frontloading means the practice of importing goods in large quantitities or earlier than usual time to avoid possible challenges that may rise in costs or obstruct supply chains. Second is the better macroeconomic outlook than predicted in April last. Nevertheless, the WTO projection also pointed out that recent tariff changes are expected to have an overall negative impact on the outlook for global trade compared to the April forecast. It was of the view that the US-China truce and exemptions for motor vehicles are contributing positively. At the same time higher reciprocal tariff rates, introduced on 7 August, are likely to weigh increasingly on imports in the US and depress exports of its trading partners in the second half of 2025. Bangladesh is one of the US trading partners which is set to face at least 35 per cent tariff on average due to 20 per cent reciprocal tariff besides the current 15 per cent average tariff.

European Union (EU) is another big market for Bangladesh and the country is likely to enhance its exports to the market as there is no tariff barrier. The challenge is that those who are facing the higher tariffs in the US will try to redirect some of the exports to the EU market and that may put Bangladesh into some extra competition. Moreover, as India has already signed a free trade agreement (FTA) with the United Kingdom (UK), there will be a competitive pressure for Bangladesh in near future. It is also not unlikely that India will try to re-export to the US through UK.

For Bangladesh, Indian market is also set to shrink as New Delhi has already put a number of trade barriers since the fall of Hasina regime which was a close ally of the Indian government. The trade barriers are clearly political although some economic justifications have been given. Though the interim government has requested for consultation to resolve the issue of trade restriction, Modi government continues to cold-shoulder the gesture and hinted that more trade restrictions on Bangladesh are in the offing.

Finally, the country is likely to enter into the election business cycle by the end of the second quarter of the current fiscal year, and the cycle would continue in the third quarter, provided that the national election takes place in February next year. As the previous election business cycles showed, it will be marked by sluggish economic growth, and so exports may not gear up as expected. So, achieving the target will no doubt be challenging.​

 

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Bangladesh’s economic performance has been unique post-uprising

Reform by the interim government helped the economy rebound.

www.thedailystar.net

Bangladesh’s economic performance has been unique post-uprising

FILE VISUAL: SALMAN SAKIB SHAHRYAR

Last year, after the violent change in power through the mass uprising, when the interim government assumed the responsibility of salvaging the economy from the brink of total collapse, the task to bring it back on track seemed almost impossible. As the true state of the economy emerged from reports of various commissions, people came to know the real depth of destruction that the economy suffered during the previous regime. The unchecked spiral of inflation, dwindling foreign exchange reserves, persistent large trade deficits, gross financial irregularities leading to a near collapse of the banking system, and deeply corrupted governance that destroyed almost all institutions, among others, were identified as the main challenges for the interim government. To stop the freefall of the economy and bring it back on course, we had to take some bold steps. Monetary and fiscal policies were tightened, stricter austerity measures were put in place, corrective measures were taken to restore discipline in the financial sector, and maximum efforts were employed to fight against corruption.

Major steps under the bold reform and recovery programmes included a detailed asset quality review, structural reform guidelines for ensuring discipline in the financial sector, initiating a process of recovery of the assets stolen from the financial system, and ensuring sufficient liquidity in the banking system. To strengthen fiscal governance, the government employed best efforts to enhance revenue collection, such as by phasing out special tax privileges and separating tax policy from tax administration. To tame inflation, the policy rate has been increased to 10 percent, which can help stabilise the exchange rate.

Looking back after a year, we are pleased to share Bangladesh's unique macroeconomic success and the story of how we have been able to turn the tide and overcome the seemingly impossible task. Recent figures and macroeconomic indicators available now tell the story.

SOURCE: COURTESY

Almost every country in the world that underwent a violent change of regime experienced output declines and a rise in inflation immediately afterwards. This has been true, for example, in the case of Sri Lanka recently, also in Indonesia when the Soeharto regime fell, in Iran during the early 1980s, and in Russia during the early 1990s. In Indonesia, poverty rate jumped from around 15 percent to around 33 percent in one year. In Sri Lanka, around 26 percent of people lived in poverty in 2023, a year after the violent fall of the previous regime. Between 1991 and 1993, Russia's inflation exceeded 800 percent, and it took nearly 10 years for the country to recover. Meanwhile, male life expectancy fell six years between 1991 and 1994 in the country. The former Soviet republics and Eastern Europe experienced a similar decline in life expectancy during this same period.

But this did not happen in Bangladesh, where rather inflation fell and GDP growth remained in the positive territory.

This remarkable macroeconomic resilience, supported by our government's policies, is being reflected in growing investor confidence. For example, Dhaka Stock Exchange's (DSEX) rally in July, surging by 12.5 percent, ranked third among major global market performers, behind only Vietnam's VN30 (+13.93 percent) and Thailand's SET (+12.54 percent). The index soared 605 points to close at 5,443, the highest level in nine and a half months.

SOURCE: COURTESY

The right policies taken by the interim government have stopped the bleeding of the Bangladesh economy, which is showing signs of rebound. Due to incentives and confidence improvements, the expatriates are sending out record levels of remittances through proper channels, leading to a significant improvement in the foreign exchange reserves. Confidence in the financial system has also been regained through improved governance. The local currency has become stable even after adopting a market-based exchange rate regime.

However, challenges still remain, especially in the financial sector. It will require a careful mix of salvage operations and difficult decisions to reduce risks in the financial sector to acceptable levels. Special care will be needed to avoid expenditures against unnecessary projects and to improve the project implementation rate. Innovative measures are being taken in the power sector to reduce subsidies. We are also continuing necessary support to critical areas such as food security and social safety.

What seemed impossible a year ago is now under control and we hope to further improve the state of the economy in the coming months. While the inflation is now showing a downward trend, we will continue our policies to bring it down below seven percent. Based on strong fundamentals and macroeconomic stability, supported by well-coordinated fiscal, monetary, exchange rate, and capital market policies, we expect further improvements. In other words, we expect growth to pick up, inflation to decline further, as well as buoyancy of the stock market.

Salehuddin Ahmed is adviser of Ministry of Finance and Ministry of Science and Technology.

Anisuzzaman Chowdhury is special assistant to the chief adviser at the Ministry of Finance.​

 

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Bangladesh Exports hit 32-month high in July​

Photo: Rajib raihan

The country's exports rose to $4.77 billion in July, up nearly 25 percent from $3.82 billion a year earlier, according to the Export Promotion Bureau (EPB), marking the highest monthly earnings from merchandise shipment since November 2022.

Key contributors to the growth in the first month of the new fiscal year included pharmaceuticals, leather goods, engineering products and an increase in ready-made garment (RMG) shipments.

Frozen fish, vegetables and tobacco also performed well, while tea and glassware exports fell.

This development came just a day after the Bangladesh Bank reported a 29 percent year-on-year increase in remittance income in July, maintaining buoyancy as more than 40 lakh Bangladeshis have gone abroad for work over the past four years.

After the political changeover in August last year, exports and remittances together have helped ease pressure on the foreign exchange reserve.

The country's external balance returned to surplus in the recently concluded fiscal year 2024-25, following three years of persistent deficits.

Anwar-ul-Alam Chowdhury Parvez, president of the Bangladesh Chamber of Industries (BCI), said the export growth did not come from exceptional demand or from front-loading, a practice where exporters rush shipments in anticipation of tariffs or other supply chain issues.

"The nearly 25 percent export growth in July was not a response to looming American tariffs, but rather a result of seasonal factors and a low base in that month last year," said the business leader.

He pointed out that political unrest in July last year had disrupted production, with many factories unable to operate fully. "This year, production did not face similar incidents," he said.

"So, the growth reflects a seasonal rebound rather than extraordinary demand."

Although the July figures appear promising, Parvez urged caution. "US and European buyers are still hesitant. Some were holding back orders until early August."

He added that exports might fall in August and September, typically a lean period. "Things should begin improving again from October."

Parvez also talked about the potential impact of the United States reducing reciprocal tariffs to 20 percent from 35 percent. He said there was no immediate effect.

"But, if retail prices rise by even $2 to $3, hypermarkets like Walmart and Target may cut volume. Sales could drop 30 percent to 35 percent."

Most current shipments are part of the winter collection and are expected to continue through mid-August. Summer and Christmas products will begin shipping from September.

"Many orders were booked earlier, but final confirmation was delayed. This week is key. It may take three to four more months for full clarity," he said.

Asif Ibrahim, vice chairman of Newage Group and a former director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said the strong performance in July was driven by a mix of global and domestic factors.

"One major driver was the front-loading of orders by international buyers, especially from the United States," Ibrahim told The Daily Star. "Concerns over potential tariff hikes led many brands to speed up their shipments, pushing a large volume of orders into July."

He added that geopolitical tensions and trade uncertainties, particularly around China, had reshaped global sourcing strategies. As buyers looked to diversify, Bangladesh gained ground as a reliable option.

Ibrahim said traditional markets such as the European Union, United States and Canada continued to show strong demand, while non-traditional markets, including Japan, India and Australia, saw rapid growth.

He also commented that Bangladesh's improved compliance in factories, greater efficiency and rising focus on sustainability had made the sector more competitive globally.

"These combined dynamics created an unusually high volume of exports in July," he said. "It is a positive signal for the sector's performance in the quarters ahead."

Pharmaceutical exports saw the highest growth, jumping 61.85 percent year-on-year to reach $19 million, up from $12 million in July last year.

Wasim Haider, international marketing manager at Beximco Pharmaceuticals, said the surge likely resulted from multiple overlapping factors.

"This kind of jump is unusual for July," he told The Daily Star, pointing to delayed June documentation and new product approvals as possible reasons.

In July, leather footwear exports rose by 26 percent. But Nasir Khan, chairman and managing director of Jennys Shoes, said the gains could have been far greater if not for delays and corruption.

"Our shipments often stall at ports due to slow bond clearances," he said, adding that exporters face demands for "bribes up to Tk 5 lakh just to move files."

Khan claimed that a network of "unofficial lobbying quarters" and influential officials had taken control of key export approvals, holding back one of the most promising sectors outside the RMG industry.

Despite rising global demand, he said red tape, middlemen and "grease money" continue to undercut the sector's full potential.

 

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FDI in Bangladesh rose 20% in FY25​

Economists say growth positive but still falls short of long-term needs

Bangladesh saw a rebound in foreign direct investment (FDI) in the fiscal year (FY) 2024-25, with net inflows reaching $1.71 billion.

The figure marks an increase of nearly 20 percent compared with the previous year, following a three-year low in FY24 amid a heated political climate centred on the national elections and subdued investor confidence, according to central bank data.

Economists and business leaders welcomed the recovery as a sign of renewed investor confidence. Still, they warned that the overall volume remains far below what is needed to support the country's long-term development ambitions.

They said sustained reforms, political stability, reliable infrastructure, and investor-friendly policies are essential to attract new greenfield investments and diversify the FDI base.


"It is good to see this uptick, but it is important to understand how much came from new investors versus reinvestments by those already operating in Bangladesh," said Syed Akhtar Mahmood, former lead private sector specialist in the Trade & Competitiveness Global Practice of the World Bank Group (WBG).
"Reinvestment could reflect growing confidence, but it may also be a response to rising local borrowing costs," he added.

Mahmood said attracting new foreign investors is critical for long-term growth and diversification. "While existing investors are important, Bangladesh must actively seek fresh investment, especially in export-oriented sectors and emerging industries."

He also called for examining the sectoral distribution of FDI, especially in areas that support exports such as energy, logistics, and new product development.

He noted that much of the FDI recorded in a given year often reflects decisions made earlier. "So, while the current figures are encouraging, the full impact of recent reforms may not yet be visible."

Rupali Chowdhury, former president of the Foreign Investors' Chamber of Commerce and Industry (FICCI), said the current level of FDI is insufficient to meet Bangladesh's long-term growth goals.

"To increase our GDP growth by 1 percent per year and become a high-income country, we need at least $8 billion in FDI annually. But inflows have remained between $1.5 billion and $3 billion," she said.

She pointed to persistent uncertainty as a major deterrent for foreign investors. "Concerns over the overall business environment are holding back investment," said Chowdhury, urging the government to prioritise resolving the gas and power shortage and improving logistics.

She compared Bangladesh with regional peers. "Vietnam attracted around $36 billion in FDI commitments in 2024, while India secured more than $28 billion. Even smaller Southeast Asian economies like Cambodia have often outpaced Bangladesh in winning large greenfield projects."

She added that consistent, investor-friendly policies are essential to attract and retain quality investment. Chowdhury cited the Japanese economic zone as a promising model for drawing FDI.

Ashraf Ahmed, former president of the Dhaka Chamber of Commerce and Industry (DCCI), described the recent rise in FDI as encouraging, crediting efforts from both the public and private sectors.

"This is certainly a positive sign and the result of a lot of hard work," he said. Ahmed, however, added that the overall volume remains far below what is needed to achieve Bangladesh's growth ambitions.

"The aggregate FDI still stands at a very low base," he said, noting that much more needs to be done to attract both domestic and foreign private investors.

The business leader stressed that progress must be made in political stability, macroeconomic management, infrastructure, regulation, and the broader business environment.

"Only a consistent and comprehensive reform strategy will enable Bangladesh to unlock its full investment potential and remain globally competitive," he added.

M Masrur Reaz, chairman and CEO of Policy Exchange of Bangladesh, also welcomed the FDI increase, describing the year-on-year rise as encouraging.

However, he cautioned that inflows remain far below what is required to sustain long-term growth.

Read more

FDI hits 2-year high in Jan-Mar​

"While the numbers look good on the surface, they are still quite low compared with our needs," he said, adding that much of the investment is concentrated in export-processing activities.

Reaz added that much of the recent FDI has come from reinvestments by existing foreign investors rather than new greenfield projects or entry into new sectors. "If this pattern continues, we should not be overly satisfied with the headline figures," he said.

The economist called for time-bound reforms to attract new investors, diversify sectors, and improve transparency. "Without a sector-wise breakdown of FDI, it is difficult to assess the quality and sustainability of these inflows," Reaz said.

 

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Bangladesh, Pakistan to form commission on trade, investment​

Bangladesh and Pakistan have agreed to establish a new joint trade and investment commission to boost bilateral trade, Commerce Adviser Sk Bashir Uddin said yesterday.

The two sides will also revitalise the existing Joint Economic Commission (JEC), which has remained inactive for the past decade and a half, to enhance cooperation in trade, investment, and economic exchanges, he told reporters after a meeting with visiting Pakistani Commerce Minister Jam Kamal Khan at the commerce ministry in Dhaka.

During the talks, Bashir urged Pakistan to withdraw the anti-dumping duty it has imposed on Bangladesh's hydrogen peroxide exports.

He also sought duty-free access for one crore kilogrammes of Bangladeshi tea, a facility that had previously existed. In addition, he called for Pakistani cooperation in Bangladesh's leather and sugar industries.


The adviser noted that Bangladesh imports around $80 billion worth of goods annually, of which $15 billion goes to food items. Pakistan, he said, could be a reliable source to meet part of this demand.

Replying to a query from journalists regarding the import of goods from Pakistan, the adviser said that Bangladesh considers "almost all countries," including the USA and India, as potential suppliers.

Trade between the two countries is heavily tilted towards Pakistan, as Bangladesh imports industrial raw materials, rice, and intermediary goods for industrial use.
Bangladesh has scope to import stones and mineral resources from Pakistan.

Commerce Secretary Mahbubur Rahman added that both countries are now "engaging to ease trade and commerce" after years of limited progress.

Both Bangladesh and Pakistan may finalise some memorandums of understanding on trade and investment over the next three days during the stay of the Pakistani commerce minister in Dhaka.

Khan arrived in Dhaka yesterday on a four-day visit to discuss bilateral trade and investment between the two countries.

Meanwhile, in a separate development, Khan met with Taskeen Ahmed, president of the Dhaka Chamber of Commerce & Industry (DCCI), at the chamber's office in Dhaka yesterday.

During the meeting, the Pakistani minister said the two countries have significant potential to work together in diversifying their export baskets to capture major markets in Europe, Canada, and the United States.

He noted that both countries currently rely heavily on the apparel and textile sectors for exports.

He pointed out that in Europe, Canada, and even in the United States, demand for reused clothing has recently surged and is gaining popularity.

Entrepreneurs from both Pakistan and Bangladesh, he suggested, could collaborate to tap into this growing market.

He also announced that a "Single Country Exhibition" of Pakistani products will soon be organised in Bangladesh to strengthen private-sector ties between the two nations.

 

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