Bangladesh’s readymade garment (RMG) industry, which anchors the national economy with over 80% of total export earnings, is under growing financial stress. A deepening cash crunch—fueled by delayed export payments, rising production costs, and declining Cut-to-Make (CM) rates—is threatening the survival of many garment factories and may severely impact the broader economic outlook.
Employing approximately 4 million workers, the RMG sector is now grappling with fundamental challenges to operational sustainability.
One of the key concerns voiced by industry players is the continued pressure from international buyers to accept unsustainably low CM rates, while the cost of production continues to climb. The CM rate, which covers cutting, sewing, finishing, and related labor overheads, has not kept pace with inflation, wage hikes, and utility costs.
“We’re being offered CM rates similar to those before COVID, while our operational costs have gone up significantly,” said Mohammad Imran, owner of a small RMG unit in Narayanganj. “We’re often running at break-even—or worse—just to keep the factory alive.”
For smaller and mid-sized garment factories with limited capital buffers, the low CM makes it extremely difficult to pay wages on time, clear utility bills, or invest in compliance and safety upgrades.
Adding to the financial woes is the growing delay in export payments. In many cases, payments from foreign buyers—previously received within 60 days—are now taking 90 to 120 days or longer. Meanwhile, global demand has softened, with buyers reducing order volumes due to inflationary pressures and excess inventory.
According to Export Promotion Bureau (EPB) data, the country’s RMG exports dropped by 4.9% year-on-year in the first quarter of 2025, reflecting global economic uncertainty and shifting sourcing strategies.
Banks have become cautious in extending credit to RMG exporters due to rising default risks and liquidity tightening. Despite Bangladesh Bank’s export refinancing schemes, access remains difficult for many factories, particularly those lacking formal documentation or collateral.
In response, industry experts are advocating for selective automation as a way to reduce unit costs and improve production efficiency—without fully replacing labor.
“Automation in areas like fabric spreading, cutting, or sewing line balancing can reduce waste and time, enabling factories to maintain competitiveness despite low CM,” said Engineer Shafiqul Alam, a senior consultant with several EPZ-based firms. “But such investments require financial support and strategic planning, which many factories currently lack.”
The financial strain has led several garment units to reduce production days or suspend operations. Workers, especially those on temporary contracts, are facing layoffs or delayed wages. This creates a potential socio-economic ripple effect, especially in areas heavily dependent on RMG employment.
“If this trend continues, it could dampen household consumption, slow export earnings, and put pressure on the banking and financial systems,” warned Dr. Mustafizur Rahman, Distinguished Fellow at CPD. “The RMG sector’s distress is not isolated—it affects the broader macroeconomic framework.”
To address the crisis, industry bodies such as BGMEA are urging for:
“Without coordinated action, we risk losing the competitive edge that took decades to build,” said BGMEA President Faruque Hassan. “This is a moment for the government, buyers, and factory owners to work together to protect the industry and, by extension, the national economy.”
RMG industry cash crisis in Bangladesh—driven by low CM rates, payment delays, and rising operational costs—is not just a factory-level issue; it’s a macroeconomic concern. Without timely interventions and a push for smart automation and fairer CM pricing, Bangladesh’s largest export sector could face irreversible damage.
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