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BGMEA Urges Govt to Sustain Policy Support for Garment Industry Amid Global Challenges

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The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has called on the government to persist in providing policy support to uphold the competitiveness of the ready-made garment industry amidst global economic challenges.

During a meeting at the Secretariat in Dhaka on Sunday (4 February), a delegation led by BGMEA President Faruque Hassan conveyed this message to Finance Minister Abul Hassan Mahmood Ali, according to a press release.

The delegation, including former BGMEA president Md Siddiqur Rahman, BGMEA Senior Vice President SM Mannan (Kochi), Bangladesh Textile Mills Association (BTMA) President Mohammad Ali Khokon, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Executive President Mohammad Hatem, and Federation of Bangladesh Chambers of Commerce & Industries (FBCCI) Vice President Md Munir Hossain, met with Commerce Ministry Senior Secretary Tapan Kanti Ghosh and Finance Division Secretary Md Khairuzzaman Mozumder.

Expressing congratulations to Finance Minister Abul Hassan Mahmood Ali for taking on the responsibilities of this crucial ministry, the meeting primarily addressed the urgent issues faced by Bangladesh’s ready-made garment industry.

Discussions centered around the impact of the global economic situation on the RMG industry, LDC graduation, and its consequences for Bangladesh’s trade.

BGMEA President Faruque Hassan outlined the significant challenges affecting the RMG industry, citing the repercussions of the Russia-Ukraine war, which has led to considerable inflation in the United States and European Union countries. This inflation has resulted in a decrease in apparel exports to key markets for Bangladesh.

Highlighting that a decline in garment exports would adversely affect Bangladesh’s foreign reserves, as the RMG industry constitutes 84% of the country’s total export earnings, he also noted the industry’s efforts to implement a new minimum wage for garment workers amid escalating energy and raw material prices.

In this demanding environment, the sudden government decision to reduce cash incentives for garment shipments and other export-oriented products is anticipated to negatively impact exports and the overall economy, Faruque Hassan asserted.

BGMEA President Faruque Hassan urged the government to reconsider this decision and maintain the previously established policy support through cash incentives.

Finance Minister Abul Hassan Mahmood Ali reassured the delegation that the government would thoroughly examine the issue of cash incentives to provide support to the RMG industry.

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Modi Likely to Visit Bangladesh in First Bilateral Trip Post-Re-Election

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Indian Prime Minister Narendra Modi is set to visit Bangladesh later this month, marking his first bilateral trip following his re-election.

Initially, Bangladeshi Prime Minister Sheikh Hasina was slated to visit India at the end of June or early July. However, following her attendance at Modi’s swearing-in ceremony in New Delhi over the weekend, plans have shifted. According to the Economic Times, Modi is now preparing for a visit to Dhaka in response to an invitation extended by Hasina.

This prospective visit aligns with India’s ‘Neighbourhood First’ policy, aimed at reinforcing its leadership role in South Asia.

During their meeting in New Delhi on June 9, Hasina formally invited Modi to visit Bangladesh. Although exact dates for the visit are yet to be finalized, the agenda will likely focus on enhancing cross-border connectivity, energy cooperation, and business ties between the two nations.

Sources indicate that India is keen on strengthening its security and defense partnership with Bangladesh, reflecting the strategic importance of this bilateral relationship.

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Moody’s Predicts Further Decline for Bangladesh’s Taka Amid Currency Policy Shift

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Bangladesh’s taka is expected to plunge further into record-low territory as the central bank loosens its control over the currency, according to Moody’s Ratings.

Young Kim, an analyst at the rating firm in Singapore, projects that the taka will likely weaken by another 2% to around 120 per dollar by the year’s end. This forecast comes as the currency has been hitting a series of record lows in recent days.

The central bank’s recent introduction of a crawling peg system is anticipated to align the taka’s value more closely with its rate in the unofficial market, Kim explained. This adjustment is part of a broader package of policies recommended by the International Monetary Fund, which provided Bangladesh with a $4.7 billion bailout program last year. This policy shift aims to help the nation prevent further depletion of its foreign exchange reserves—a factor Fitch Ratings cited when it downgraded Bangladesh’s credit score further into junk status in May.

“Most of the pressure for Bangladesh is external, centered around the fixed-exchange rate that caused a distortion between the market and the official rate,” Kim noted. “This significant devaluation of the taka helps reduce some of these imbalances by narrowing that gap.”

In May, the central bank implemented the crawling peg exchange rate system and set the mid-rate at 117 taka per dollar. This move prompted an almost 8% decline in the currency this quarter. On Tuesday, the taka weakened further by 0.3%, reaching 117.7 against the dollar and closing at a new low.

Amidst the currency devaluation, Bangladesh is also cutting spending and raising taxes to narrow the budget deficit and boost revenues, as the country faces a steady erosion of foreign reserves. To curb inflationary pressure, the central bank has transitioned to market-based interest rates, responding to the fastest pace of price increases seen in seven months in May.

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Bangladesh, ADB Ink $250M Loan Deal for Social Resilience Program

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The Asian Development Bank (ADB) and the government of Bangladesh have signed a $250 million loan agreement to bolster Bangladesh’s social protection system.

Md. Shahriar Kader Siddiky, Secretary of the Economic Relations Division (ERD), and Edimon Ginting, ADB’s Country Director, signed the agreement today at a ceremony held at the ERD in the capital.

“The Second Strengthening Social Resilience Program aims to accelerate reforms by increasing the coverage and efficiency of protection, improving financial inclusion for disadvantaged people, and strengthening the response to diversified protection needs,” stated Country Director Edimon Ginting.

Building on the first Strengthening Social Resilience Program completed in June 2022, this second initiative seeks to improve the policy, regulatory, and institutional framework for social protection in Bangladesh. This program aligns with the government’s Action Plan Phase II of the National Social Security Strategy (2021-2026), aiming to enhance the social protection system’s protective and preventive capabilities.

According to a press release, the program will improve efficiency in social protection program management, increase protection for the most vulnerable populations, and expand the scope of social protection by introducing contributory schemes. These measures aim to reduce vulnerability, social exclusion, and the risk of further poverty.

The program will introduce a beneficiary verification scheme for cash-based social protection programs to minimize leakages. It will also merge two cash-based protection programs for people with disabilities to improve efficiency and effectiveness.

To address climate vulnerability, the program will integrate climate adaptive measures into social protection, including identifying individuals most at risk from climate change-induced disasters to ensure appropriate assistance.

ADB’s support will enhance protection for vulnerable women and transgender people by increasing the number of beneficiaries under the widow allowance program and extending the livelihood support program for transgender individuals.

Additionally, Bangladesh Bank will double its funding for the Small Enterprise Refinancing Scheme for Women Entrepreneurs to improve access to financial services for women small business operators.

Another key objective of the program is to strengthen the governance mechanism of the employment injury scheme pilot, particularly in the ready-made garments sector. It also supports establishing a tripartite committee comprising workers’ associations, employers’ associations, and the government to advance social protection for workers under the Ministry of Labour and Employment, a crucial step in developing the country’s social insurance schemes.

To support the implementation, technical and policy analyses, and capacity building of relevant government agencies, ADB will provide a $1 million grant from its Technical Assistance Special Fund (TASF 7) and another $1 million grant from the ADB-administered Community Resilience Partnership Program Trust Fund under the Community Resilience Financing Partnership Facility.

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