Bangladesh will raise the cash incentive for apparel exports made with locally-produced yarn from 1.5 per cent to 5 per cent, the finance minister has said.
The move would cost the exchequer nearly $308 million.
Garment exporters earlier received a 4-per cent cash incentive for using domestic yarn, but it was cut to 1.5 per cent in 2024 as part of preparations for graduation from the LDC status.
Chowdhury met a BTMA delegation led by its president Showkat Aziz Russell.
Garment exporters earlier received a 4-per cent cash incentive for using domestic yarn, but the government had cut it to 1.5 per cent in 2024 as part of preparations for graduation from the least developed country status. The incentive is also subject to a 10-per cent tax.
The decision would significantly narrow, or even eliminate, the price gap between imported and locally-produced yarn, textile mill owners and garment exporters feel, encouraging apparel exporters to source more yarn from domestic textile mills.
Nearly 95 per cent of Bangladesh’s imported yarn comes from India.
Once the finance ministry approves the proposal next week, Bangladesh Bank is expected to issue a circular, according to domestic media outlets.
BTMA statistics shows Bangladesh imported yarn worth around Tk 260 billion (~$2.1 billion) in FY25 despite having sufficient domestic capacity.
Garment manufacturers, however, say they would still prefer domestic yarn even if it costs up to 20 cents more, as such sourcing reduces banking, warehousing and work-in-process costs.
Fibre2Fashion News Desk (DS)
