Bangladesh unveils 600 billion taka stimulus to revive factories, jobs

Bangladesh’s 600 billion taka rescue package is a warning flare from one of the world’s most important apparel hubs, where weaker export orders are now squeezing factories that help supply U.S. and European consumers. The central bank’s move is designed to restart production, preserve jobs and prevent a manufacturing slowdown from spreading deeper into the economy.

Bangladesh Bank Governor Mostaqur Rahman unveiled the package at the central bank headquarters in Dhaka, saying the plan would draw 410 billion taka from banks with excess liquidity and 190 billion taka from Bangladesh Bank’s own reserves. The refinancing portion will be tied to a 10% interest rate, a sign that policymakers are trying to keep credit moving even as borrowing costs remain elevated.

The biggest slice, 200 billion taka, is aimed at reopening closed and distressed factories and supporting service-sector businesses. Another 100 billion taka is earmarked for agriculture and the rural economy. Officials say the package could help create about 250,000 jobs, a meaningful target in a country where industrial hiring rises and falls with export performance, especially in ready-made garments.

The timing reflects mounting pressure on Bangladesh’s industrial base. Business leaders from the Bangladesh Garment Manufacturers and Exporters Association and the Bangladesh Knitwear Manufacturers and Exporters Association met government officials on May 11 to push for relief for struggling factories. Trade leaders said the fund was expanded beyond closed plants to include financially distressed operating units after their appeal, broadening the safety net for firms that are still open but under severe strain.

The macroeconomic backdrop is worsening. Growth eased to 3% in the second quarter of FY2025-26, down from 3.5% a year earlier, after Bangladesh’s economy had already slowed to 3.5% in FY2025, its third straight deceleration. Inflation averaged 10.0% in FY2025, with food inflation at 10.7%, while a provisional reading for October to December FY2025-26 showed growth at 3.03% and industrial expansion at just 1.27%, the weakest second-quarter performance since the Covid-era slump in FY2021.

That combination of slower demand, tight financing, political uncertainty and higher costs helps explain why authorities are leaning on countercyclical support now. The package may keep factories open, protect export earnings and buy time for businesses facing disrupted supply chains and soft global demand. It also underlines a harder truth: Bangladesh is trying to stabilize not just a sector, but a labor market and export model under pressure.