Tk1,958cr in Q1 export incentives stuck in payment delays

Export Incentive Arrears Put New Pressure on Bangladeshi Businesses

Bdbusinessdaily.com – Bangladesh’s exporters are still waiting for a substantial portion of the cash incentives intended to support overseas sales, creating added uncertainty for businesses already managing production costs, shipment schedules and investment plans. Commercial banks are owed Tk1,958 crore in export incentive payments for the July-September quarter, while the government had cleared claims through June.

The outstanding amount matters because exporters cannot receive these incentives until the government releases the funds through Bangladesh Bank. The system differs from the 2.5% cash incentive on remittances, which commercial banks can initially pay from their own resources. For export incentives, banks must wait for the release of public funds before disbursing money to eligible businesses.

That distinction can leave exporters with a long gap between completing an export transaction and receiving the support promised under the incentive programme. For firms that use the funds in financial planning, delayed payments can complicate decisions on purchases, expansion and future investment.

Long Waits Continue Despite Earlier Improvements

Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association, said the typical exporter may wait roughly 18 months after shipping goods before receiving incentive money.

The delay develops at several stages. Export proceeds generally take about six months to return to Bangladesh after shipment. Exporters then submit incentive applications through their commercial banks. Those applications are sent to audit firms for verification, returned to the banks with certificates, and then forwarded to Bangladesh Bank for payment.

Hatem said the documentation journey to the central bank can itself take close to a year.

“By the time the entire process is completed, exporters have to wait around one and a half years to receive the money,” Hatem said.

He noted that the waiting period had once extended to around two years. While the timeframe has improved, it remains difficult for businesses that need predictable cash flow. Outstanding incentive liabilities previously climbed to Tk5,000 crore, Hatem said, before falling partly after the government reduced incentive rates.

Banks Carry Pending Claims

Bangladesh Bank figures show that several banks have notable unpaid incentive claims. City Bank has Tk112 crore pending, while Mutual Trust Bank is owed Tk32.45 crore. Islami Bank Bangladesh has Tk98 crore outstanding, Dutch-Bangla Bank has Tk33.86 crore, and Eastern Bank has Tk100 crore due.

These figures represent a broader concern for the export sector: the incentive scheme may be available on paper, but the timing of payment determines how useful it is in practice. When payments arrive far after export contracts have been fulfilled, businesses may be unable to use the support for the period in which it was most needed.

Competitiveness Concerns for Garment and Textile Firms

Exporters argue that delayed support weakens Bangladesh’s ability to compete with regional manufacturing centres. Imran Kader Turjo, a director of the Bangladesh Knitwear Manufacturers and Exporters Association and managing director of Southern Knitwear, said competitors in India and Vietnam receive stronger facilities and more timely incentives.

“Exporters in India and Vietnam receive incentives on time, giving them opportunities to expand their businesses and make new investments,” Turjo said.

He said uncertainty over the release of government support makes it harder for Bangladeshi firms to prepare budgets, approve investment proposals and pursue expansion. Rather than receiving payments throughout the year, exporters often see incentives released around the two Eid festivals, he added.

“This should not happen. The government should release incentives for each month within that month. Even if at least 60% of the incentives were disbursed monthly, the scheme would serve its purpose,” Turjo said.

For manufacturers, especially those operating with thin margins and frequent working-capital needs, the regularity of payment can be as significant as the percentage offered. A predictable monthly release could allow firms to treat the incentive as a dependable element of financial management instead of an uncertain future receipt.

Support Still Applies to 43 Export Segments

Under the latest Bangladesh Bank policy, which remains effective for FY27, 43 export sectors qualify for cash incentives ranging from 0.30% to 10%. Readymade garments and textiles remain among the major recipients. Garment exporters receive a 5% incentive under the current arrangement.

The policy carries particular importance for Bangladesh’s export-oriented manufacturing base, where garment and textile businesses account for a large share of production activity and overseas sales. Incentives are designed to help eligible sectors retain competitiveness, but delayed disbursement can limit their immediate value.

The government cut export incentive rates in two stages during 2024, when the Awami League was in power. The reductions were linked to Bangladesh’s expected graduation from the least developed country category in 2026. Once graduation takes effect, World Trade Organization rules will place limits on the country’s capacity to provide export subsidies.

Rather than ending the support abruptly, authorities chose a gradual reduction to soften the adjustment for exporters. The remaining incentive programme therefore continues to function as a transitional measure for dozens of industries, even as the level of assistance is reduced.

Why Timely Payments Matter

Cash incentives are not simply an additional payment after an export sale. For many firms, they influence whether funds are available for raw materials, wages, factory upgrades, compliance work or new orders. When the payment timeline stretches well beyond the shipment date, exporters must cover those needs from other sources while waiting for money that has already been earned under the policy.

The Tk1,958 crore backlog for the first quarter highlights the continuing gap between eligibility and actual receipt. Clearing the arrears would relieve pressure on commercial banks and exporters, but businesses are also calling for a more regular process that prevents the same delays from returning.

As Bangladesh moves closer to LDC graduation and a more restricted subsidy environment, exporters face a changing support system. The immediate challenge is ensuring that incentives already approved under existing policy reach businesses in time to contribute to their competitiveness, planning and growth.