FBCCI seeks continuation of cash incentives until 2026

The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) has urged the government to retain the cash incentive facility for the exporters until 2026, saying scrapping or cutting it will hurt businesses. 

On 30 January, the central bank announced to slash or stop the cash benefits for 43 export sectors, including ready-made garments and leather, for six months up to June this year as part of Bangladesh's preparations for exit from LDC status.

The apex trade body has also requested the finance ministry to increase the benefits further, citing business challenges.

"Since there is an opportunity to provide cash assistance till 2026, it is necessary to maintain this without reduction or cancellation, and if necessary its scope should be increased, given the current economic challenges," FBCCI President Md Mahbubul Alam wrote to Finance Minister AH Mahmood Ali on 3 February.

He said in consideration of the potential situation after 2026, it will be appropriate for the government to take a logical decision in this regard and take measures alternative to cash assistance.

The 43 export sectors had been enjoying cash incentives ranging from 1% to 20% on the export value as part of a government decision for encouraging exports.

The benefits have been completely withdrawn on the export of five major items of RMG, which account for more than half of the total apparel shipments that constitute 84% of the country's export basket.

The latest decision has fuelled concern among the exporters.

Meanwhile, the leaders of three organisations of the RMG and textile sector have met the Finance Minister and demanded that the central bank circular be suspended.

They argued that the exporters have to incur financial losses as they have already taken supply orders keeping the incentives in mind.

However, some economists think that the government's decision was correct but said there are flaws in the process.

Ahsan H Mansur, executive director at the Policy Research Institute said the sudden cancellation decision without any prior notice was not correct.

"Six months' time should have been given instead of cancelling it suddenly. So, we suggest that the decision be implemented from next July instead of January. There should also be an implementation roadmap leading to 2026," the economist told The Business Standard.

He believes that the decision is "justified", saying that the exporters now get 35% extra benefit on average due to currency devaluation.