Bangladesh, the world’s second-largest apparel exporter, is accelerating efforts to diversify its exports away from one principal product as it seeks to preserve its economic growth momentum, Finance Minister A. H. M. Mustafa Kamal said.

Readymade garments currently account for more than 80 percent of the nation’s total exports, with the bulk of the shipments headed to either Europe or the US. The pandemic-induced global demand slump has already contributed to a slowdown in exports, which makes up about 15 percent of the economy. Prime Minister Sheikh Hasina’s government is now seeking to encourage exports of everything from electronics to jute.

“At the moment, we are confronting risks in the export sector on two fronts,” Kamal said in an email interview. “We are relying on a narrow export product basket” and few destinations, he said.

Diversification of exports assumes urgency for the South Asian nation for reasons beyond the pandemic. Bangladesh, which is among the rare few economies to keep expanding in a world hit by recession, is set to jettison its least developed country status by 2024 — a classification that currently makes it eligible for the European Union’s “Everything but Arms” trade deal that grants duty-free, quota-free access for all exports, except arms and ammunition.

While exiting the LDC category won’t immediately alter the favourable terms of trade, the economy could face hurdles when trying to forge new trade agreements going ahead, possibly hurting readymade clothing exports.

“To reduce such risks, the government wants to encourage exports of products that have high export potential but lack necessary capacity,” Kamal said.

The government has identified a number of products, such as pharmaceuticals, ship-building, furniture, jute and electronics, where it sees potential to grow exports. It has simplified shipment processes, allowing exporters in some cases to issue themselves the ‘Statement of Origin’ label to declare the source of their products. Focus is also on enhancing services exports, the minister said.

For now, the government has helped prop the trade sector through various stimulus measures, including a special fund for salary support to workers and employees of export-oriented manufacturing industries.

The economy, which is expected to have expanded 5.2 percent in the year ended June, is sticking to its target of 8.2 percent growth in the current financial year. That’s faster than the 6.8 percent growth projection made by the Asian Development Bank for the period.

Should global economic recovery take time, the government will stand ready to unveil more support measures, Kamal said. The government’s support measures so far total about $14.5 billion, or 4.34% of gross domestic product.

“We believe that stimulus packages will be the key,” he said. “The government will lay greater emphasis on increasing the volume and magnitude of its stimulus measures.”

More fiscal steps will help take the pressure off the nation’s central bank, which earlier this year capped interest rates on most retail and commercial loans at 9 percent — a move seen as a risk to health of financial institutions as it limits their ability to price in risks.

“The costs of funds for industries and services sectors have greatly been reduced,” Kamal said, adding that “further cuts in interest rate is not being considered at the moment.”

By Arun Devnath.