The readymade garment (RMG) sector needs to be supported in the long run to recover from the losses induced by the Covid-19 pandemic, says the Bangladesh Bank.
In its Quarterly Review on Readymade Garments (RMG): October-December FY'21 published on Sunday, the central bank also recommends that the number of export destination countries be increased besides expanding the size and tenure of ongoing stimulus packages.
The Bangladesh Bank observes that the current situation can be overcome by ensuring a safe working environment for workers and emphasizing product diversification.
Incentive packages being implemented and the vaccination drives launched in various countries around the world to deal with the Covid-19 situation would soon bring about a positive change, the central bank report says.
That the RMG sector in the first two quarters of the current fiscal year could recover, to some extent, from the huge fall in exports it witnessed in June last year following the outbreak of the coronavirus has been viewed by the Bangladesh Bank as a ray of hope.
However, because of the second wave of the Covid-19 infections, the sector's export earnings fell short of expectation.
In the second quarter (October-December) of the current fiscal, this sector's export earnings fell by about 7% to $7.42 billion compared to the same period of last year. The export target for this period was set at $8.25 billion, according to the report.
About the non-fulfillment of the export target, it says the global economy did not recover as expected and exports did not increase to the desired level due to the second wave of the Coronavirus.
Bangladesh's export earnings are still dependent on readymade garments, the report mentions, adding the RMG sector accounted for 79.46% of the total export earnings in the October-December quarter of this fiscal.
It further states that the export destinations of readymade garments are limited to a few countries. The United States, Canada and nine European countries accounted for 71.86% of the garment exports in that quarter.
Even though the RMG sector is a major source of export earnings, it still has to rely on imports of various raw materials for production.
In the second quarter of the current fiscal, the sector had to import $2.85 billion worth of raw materials. If this amount is deducted from the total export earnings, the net exports of this sector during the October-December period would be $5 4.57 billion.
The garment sector generated $27.94 billion in revenue in FY20, which was 18.12% less compared to the previous year, according to the report.
The central bank report also highlighted various steps taken up by the government to support the garment sector during the pandemic.
Those steps include Tk5,000-crore interest-free loans at 2% service charge to pay wages of workers; creation of a refinancing fund or refinance scheme of Tk5,000 crore to continue exports, under which loans can be taken at 6% interest rate; and upsizing the $2.5 billion Export Development Fund to $5 billion and increasing the single borrower exposure limit for loans taken from this fund.