Bangladesh's request for a new IMF financing program has prompted a reassessment of supply chain stability in South Asia. The textile and garment sector accounts for over 80% of the country's exports, and persistent foreign exchange shortages threaten raw material imports and LC settlements.
FX Pressure and Industrial Transmission
IMF Mission Chief Ivo Krznar confirmed that Bangladesh has formally requested a new financial arrangement to support its economic reform agenda. This follows a $4.7 billion IMF loan approved in early 2023, yet foreign reserves have fallen from a peak of $46 billion in 2021 to roughly $20 billion currently.
For the textile industry, the most immediate impact is on raw material procurement. Bangladesh imports nearly all its cotton, along with substantial volumes of synthetic yarn and dyes. Delayed LC openings have already forced some small and medium garment factories to reduce production, while larger exporters are using more of their own working capital, squeezing cash flow.
Global Fast-Fashion Supply Chain Risks
Bangladesh is a core manufacturing base for brands like H&M, Zara, and Primark, with annual garment exports exceeding $45 billion. If FX constraints persist, delayed raw material arrivals will directly affect delivery schedules. In 2023, similar LC payment delays led some Chinese fabric suppliers to halt shipments—a scenario that could recur.
For Chinese textile exporters, Bangladesh is a key buyer of synthetic fibers and fabrics. In the first three quarters of 2024, China's synthetic fiber exports to Bangladesh grew about 12% year-on-year, but payment terms have lengthened from 30 to 60-90 days. Without timely IMF disbursement, buyers' payment capacity will remain under pressure.
Policy Response and Industry Adaptation
The Bangladesh government has taken measures including restricting non-essential imports, raising the mandatory export proceeds repatriation ratio to 75%, and encouraging local raw material use. However, garment exports still rely heavily on imported fabrics in the short term, limiting substitution.
Negotiations for the new IMF program are expected to take several months, during which the central bank may tighten FX controls further. Chinese companies with factories in Bangladesh should plan cross-border fund flows in advance. For fabric suppliers, it is advisable to require confirmed LCs or partial upfront payments to mitigate credit risk.