Bangladesh Bank (BB) has increased the cash incentive for the export-oriented local textile sector to 5 percent from the previous 1.5 percent for the 2026-27 fiscal year. This move aims to encourage the use of domestically produced raw materials and enhance export competitiveness.
Revised Directive Issued
The Foreign Exchange Policy Department (FEPD) of the central bank issued the revised directive through Circular No. 19, amending the provisions of FEPD Circular No. 17 issued on July 5, 2026. The revised rate applies to the alternative cash assistance of the existing export incentive policy.
Government Directive and Objectives
The increase follows a government directive aimed at providing greater support to the country's export-oriented textile and apparel sector, particularly exporters that source yarn and fabrics from domestic manufacturers instead of using bonded warehouse facilities or duty drawback schemes. The enhanced incentive is intended to strengthen the competitiveness of local textile manufacturers amid evolving global economic conditions while promoting greater value addition through domestic sourcing.
Eligibility Criteria
To qualify for the incentive, exporters must be members of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), or other relevant trade bodies. They are also required to submit documentary evidence proving that yarn, fabrics and other eligible raw materials were procured from local suppliers.
Compliance and Implementation
Bangladesh Bank said the increase in the incentive rate does not alter the existing procedures for collecting and verifying locally sourced yarn and fabrics. Exporters must continue to comply with the provisions of FEPD Circular No. 07 dated June 3, 2003, FEPD Circular No. 09 dated March 5, 2001, and other applicable regulations. The revised cash incentive will be applicable to eligible export shipments made between July 1, 2026, and June 30, 2027.
Significance for the Industry
This increase in cash incentive is expected to significantly benefit the local textile industry by encouraging more manufacturers to source raw materials domestically. It will also enhance the competitiveness of Bangladeshi textiles in the global market, potentially leading to increased export volumes and revenue. Moreover, it aligns with the government's broader economic strategy to promote local industries and reduce dependency on imported raw materials.
