Exports face massive 15% growth test

Highlights:

• Govt targets 15% export growth to $63.4bn in FY27
• FY26 exports fell 0.58%, missing the previous year's target
• Gas shortages have left 30% of industrial capacity idle
• Exporters warn high borrowing costs, weak demand and US tariffs threaten the target
• Govt banking on FTAs, export diversification and business reforms to boost shipments
• Economists say 15% growth is ambitious but achievable if domestic bottlenecks ease

Bangladesh has set an ambitious export goal for the current fiscal year, targeting a 15% jump in earnings to $63.4 billion despite factories operating well below capacity for months amid a persistent shortage of orders.

The challenge is clear, considering exports shrank 0.58% in the last fiscal year.

Economists and exporters say meeting the target will require far more than a rebound in global demand. Manufacturers continue to struggle with gas shortages, double-digit borrowing costs, weak investment and US tariffs, while sluggish consumer spending in major Western markets and geopolitical tensions continue to cloud the global trade outlook.

Infographics: TBS

Commerce Minister Khandaker Abdul Muqtadir today (26 July) announced the export target for 2026-27 fiscal year at a press conference at the ministry.

The government aims to earn $63.4 billion from exports–- $55.2 billion from merchandise shipments and $8.2 billion from services. The target represents a 15% increase over the actual export earnings recorded in FY26.

Of the merchandise export target, the government expects the ready-made garment sector to earn $44.5 billion, up from the $38.7 billion earned in previous fiscal.

For FY26, the government had targeted $63.5 billion in total exports, including $55 billion from goods and $8.5 billion from services. However, the target was missed.

Merchandise exports fell 0.58% year-on-year to $48 billion, while services exports stood at $7 billion. The services figure will be finalised in two to three months, Muqtadir said.

As a result, the overall export target for FY27 is effectively lower than the previous year's target, despite being higher than last year's actual export earnings.

'Realistic opportunity to recover'

At the press conference, Muqtadir, on the feasibility of achieving the export growth target, said business confidence had improved following the restoration of policy certainty.

He added that clarity over Bangladesh's LDC graduation and the country's market access during the transition period, together with ongoing trade negotiations, should support export growth despite domestic challenges, including the energy shortage.

He mentioned that the government had launched initiatives to accelerate exports by improving the business environment, facilitating investment and simplifying public service delivery, which he expected would produce tangible results in the near term.

He said negotiations on free trade agreements (FTA) with South Korea and the UAE are in final stages. The government aims to conclude FTAs with several other countries within this year and expects to begin formal negotiations with the European Union on an FTA shortly.

Asked when the Economic Partnership Agreement (EPA) with Japan would take effect, he said the deal would be tabled at the next session of parliament for ratification.

Regarding the trade deal with the US, Muqtadir said only the tariff's name had changed, not its rate, and it would not pose an additional obstacle to exports.

On export diversification, he said to reduce reliance on the ready-made garment sector, the government is prioritising leather, footwear, shipbuilding, ship recycling, light engineering and information technology, with sector-specific action plans to be rolled out soon.

"We want garment exports to reach $80 billion, while other sectors together contribute another $100 billion," he said.

The minister acknowledged that domestic gas production had reached its limit and Bangladesh was already importing 900 million cubic feet of liquefied natural gas a day.

With only two FSRUs in operation, the country cannot increase imports further, making any near-term improvement in energy supplies unlikely. He said the government plans to install two more FSRUs and is treating the issue as a priority.

Muqtadir said the gas shortage has left 30% of the country's installed industrial capacity idle. "While there is no quick fix, the government is working to address the problem."

'May not reach 15%, but could come close'

Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), said the government targeted 9% export growth in FY26 over the previous year's actual earnings, but merchandise exports ultimately contracted.

He cited the US' 10% new tariff, LDC graduation uncertainty and global headwinds, alongside high business and borrowing costs at home, as major obstacles to export growth. "Given these domestic and global conditions, a 15% export growth target is highly ambitious." 

However, the economist said stronger export growth remains achievable if the government effectively implemented the positive measures announced in the budget, including the national single window, faster port clearance, and reliable gas supplies.

"It may not reach 15%, but it could come close," he added.

Shehab Udduza Chowdhury, vice-president of BGMEA, said the government has announced some positive policies, but implementation remains weak.

"Overall, the challenges are mounting, making the target unrealistic," he said. 

For instance, he said India's FTA with the European Union will allow its exports to enter the bloc duty-free within the next five to six months, creating a fresh challenge for Bangladesh.

He warned that renewed tensions in the Middle East could trigger another energy shock, while gas shortages at home had already intensified.

Shehab further said manufacturers were being squeezed by rising production costs while weak demand prevented them from raising export prices.

"If the government can at least resolve domestic bottlenecks, particularly the gas crisis, exporters may be able to achieve modest positive growth," he said.

Md Fazlul Hoque, managing director of Plummy Fashions and former president of the BKMEA, shared a similar view, saying that there is little indication that global apparel demand will rebound sharply anytime soon

"At the same time, high borrowing costs, gas shortages and a weakened banking sector are making financing more difficult and driving up production costs. Bangladesh also lags competitors in productivity," he told TBS.

He added that uncertainty over global energy prices persists despite the easing of recent conflicts. "The government's target does not reflect the realities facing exporters."