Thowhid Ulla Hamidi, CFO of Dana Group, and Sourav Chakraborty, Finance Controller at ETG, discuss the need for diversification, digitization, and policy reforms to strengthen Bangladesh’s economic future
This publication is sponsored by Mitigram, the leading trade finance platform.
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In the past year, Bangladesh’s economy has shown some positive signs, with a slightly contracting trade deficit and a 10.1% year-on-year increase in exports in the first half of FY2024. However, inflation, vulnerabilities in the banking sector, and fiscal and exchange rate policies remain prominent challenges for the country. For instance, the World Bank revised Bangladesh's economic growth forecast for FY2024 to 4%, down from its earlier projection of 5.7%, citing significant political and economic uncertainties. These are the lowest growth rates since the COVID-19 pandemic. Moreover, in the last six months of 2024, the interbank exchange rate was inadequate to clear the forex market, leading to a severe shortage of dollars. These shortages have complicated trade finance operations in the country. Despite these hurdles, the World Bank projects a gradual recovery, estimating 5.5% growth in the upcoming fiscal year.
To delve deeper into the current challenges faced by Bangladesh’s trade finance and commodities market, Kamrul Hasan, our Trade Finance Advisor and Editor, spoke with Thowhid Ulla Hamidi, Chief Financial Officer of Dana Group, and Sourav Chakraborty, Finance Controller at Export Trading Group (ETG). Hamidi oversees financial strategy across sectors like power generation, building management systems, and solar installations, while Chakraborty manages finances for ETG, a multinational corporation focused on agricultural imports like pulses and chickpeas. Their insights, coupled with recent data, shed light on the current state of trade finance and commodities in Bangladesh and the urgent need for diversification and policy reform.
Both Hamidi and Chakraborty point out that Bangladesh’s export landscape is heavily dominated by the readymade garments (RMG) sector. This industry has been the cornerstone of the country’s foreign exchange earnings and continues to dominate its exports, contributing over 80% of the total. This high dependency comes with significant risks, which are further highlighted by the fact that Bangladesh's RMG exports grew by 12% between July and November 2024 compared to the same period in the previous year.
Hamidi highlights that the global apparel market is subject to shifts due to changes in technology, trade policies, and labor costs. Neighboring countries like Vietnam and Cambodia are already becoming attractive alternatives for garment manufacturers. Moreover, as Bangladesh approaches its graduation from Least Developed Country (LDC) status in 2026, it faces an increased risk of losing trade preferences. The WTO estimates that post-graduation tariff hikes could lead to a 14% decline in exports.
Adding to this, external factors such as economic downturns in major export markets can disrupt the flow of orders. “You cannot put all investments in one basket," Hamidi stressed, urging the need for diversification into sectors like pharmaceuticals, leather, agriculture, and IT services to ensure long-term resilience.
Chakraborty emphasizes the challenges posed by Bangladesh’s import-dependent economy. He points out that limited local production, coupled with a growing population, means large volumes of essential commodities must be sourced from abroad. This reliance on imports creates constant pressure on foreign exchange reserves, which stood at $20.8 billion in early 2024, providing coverage for approximately five months of imports. "Availability of forex is currently the biggest issue, and small industries are the ones most impacted," says Chakraborty.
Hamidi and Chakraborty further stress that Bangladesh’s high-risk status complicates trade finance, which acts as the backbone of businesses in Bangladesh by facilitating the import of raw materials and machinery while supporting exports. Bureaucratic red tape complicates trade finance operations, such as the issuance of Letters of Credit (LCs), and causes delays. In the last two decades, the Asian Development Bank (ADB) has supported trade finance through partnerships with Bangladeshi banks and has provided over $2.2 billion in support.
Moreover, as global markets pivot toward digitization, new fintech solutions are also providing innovative ways to make trade finance more efficient and cost-effective. However, the regulatory framework acts as a bottleneck to the adoption of these solutions. Chakraborty is optimistic about these innovations, stating that if regulations evolve to accommodate them, they could transform trade finance and reduce costs.
Bangladesh stands at a critical juncture where its economic trajectory is shaped by both challenges and opportunities. Regardless of the positive signs for growth in 2025, it must pursue diversification and structural policy reforms to stay competitive among its peers. To secure growth in the coming decades, strengthening sectors like IT, pharmaceuticals, and renewables is essential to reduce overreliance on RMG exports. In parallel, policymakers and financial institutions need to remove red tape, invest in infrastructure, and streamline processes to facilitate innovation and foreign investments.
