Government struggling to cope with major decline in export sector

Staff Correspondent

The country’s export sector is quietly facing a deep crisis amid political tensions, election-related unrest, and various hotly debated issues. Known as one of the main driving forces of the economy, this sector has been experiencing a decline in revenue for five consecutive months. According to entrepreneurs, work orders have decreased by 30 to 40 percent compared to the same period in other years. They believe that the sector is unlikely to recover before June.

Concerned parties are blaming the decline in export earnings on shrinking global demand, domestic instability in the country, and lack of policy support. Entrepreneurs fear that if this situation continues, the country’s export sector may face greater challenges on the eve of its transition from LDC.

According to data released by the Export Promotion Bureau (EPB), the country’s export earnings in December last year decreased by 14.25 percent compared to the same period of the previous year to $3.96 billion. The downward trend that started in August has not yet stopped. In the first six months of the current fiscal year (July-December), total exports amounted to $2,399.68 billion, which is 2.19 percent or about $540 million less than the same period of the previous fiscal year.

Although this deficit may not seem very large in numbers, economists believe that the reality is different. Because there has been no clear sign of recovery in export earnings even once in these six months. Exports fell by 7.43 percent in October, 5.54 percent in November, and the rate of decline increased further in December. According to them, such a continuous decline is a clear warning for future economic stability.

The country’s foreign exchange reserves are directly related to export earnings. Import capacity, industrial production, and supply of goods to the market depend on reserves. Since a large part of food grains, energy, and industrial raw materials are import-dependent, when reserves are weak, the complexity of opening LCs increases, the price of the dollar increases, and production is disrupted. The country’s businessmen experienced such a situation from the end of 2023 to mid-2024.

Currently, the pressure to repay foreign debt installments is increasing. In this situation, maintaining adequate dollar flow and stable reserves is becoming a major challenge for the government, according to those concerned.

When export earnings fall, it affects the entire economy. In addition to industrial enterprises, pressure is also created in the transport, port, banking-insurance and service sectors. In particular, the ready-made garment industry directly employs about 4 million people. The livelihood of several crores more people is directly and indirectly linked to this sector. As a result, a prolonged recession in the export sector means a big risk to employment.

BKMEA President Mohammad Hatem said that there is very little chance of export earnings recovering by June. According to him, uncertainty in gas and power supply, weakness in the banking sector and lack of adequate policy support have put pressure on the export sector. He said that while competing countries have sustained exports with cash assistance, tax breaks and easy credit facilities, Bangladesh is lagging behind in that regard.

Fazlul Haque, former president of BKMEA and managing director of Plumi Fashions Limited, said that in addition to the decline in global demand, the reciprocal tariffs of the United States are having a negative impact on exports. The deterioration of the law and order situation internally and the suspension of orders by buyers waiting for the new government have also complicated the situation. He said that his factory currently has 15 to 20 percent fewer work orders.

Former BGMEA director Mohiuddin Rubel said the ongoing economic recession in Europe and the impact of declining garment demand in the United States have pushed Bangladesh’s exports into a negative trend for five consecutive months. He said buyers are gradually turning to other countries as the production and export process in Bangladesh is expensive and time-consuming compared to China, Vietnam and Cambodia.

Bangladesh is on the verge of transitioning from an LDC to a developing country this year. After graduation, various commercial opportunities, including duty-free benefits, will gradually disappear. Analysts believe that if preparations are not adequate, its negative impact on the export sector could be even deeper.

Overall, the sluggish export sector, just before the LDC transition, is a clear warning sign for the country’s economy. According to those involved in the sector, there is a risk of a bigger setback ahead unless uninterrupted gas and electricity supply, banking sector reforms, business-friendly policy support, and political stability are ensured.