The Bottom Line Up Front

Bangladesh's once-celebrated garment industry the world's second-largest apparel exporter now faces its gravest crisis in decades. A toxic combination of foreign exchange shortage, energy blackouts, and shifting global trade patterns has left millions of workers without paychecks and factories shuttered across the country. What was once hailed as a manufacturing miracle is unraveling amid a dollar drought that exposes the fragile foundations of an economy built almost entirely on cheap labor and Western consumption.

The Export Empire Built on Sand

For four decades, Bangladesh's ready-made garment (RMG) sector has been the country's economic lifeline. The sector currently accounts for around 84-85% of the country's total exports, making it perhaps the world's most export-dependent economy. The RMG sector earned $39.35 billion, showing a robust 8.84% growth compared to the previous fiscal year in FY25, yet this seemingly impressive figure masks a deeper structural crisis.

Estimates suggest Bangladesh will cross $50 billion in RMG exports in 2025, an all-time high, but the industry's concentration makes it uniquely vulnerable. Unlike competitors, Bangladesh has no meaningful economic diversification textiles are not just important, they are everything.

The sector's workforce tells the story of this dependence: around 4.6 million workers, with 60% of them being women. But these numbers are deceptive. Ten years ago, women made up 80% of garment workers in Bangladesh. Now the number is reportedly closer to 60%, signaling a "re-masculinization" driven by automation that is displacing the very women who built the industry.

The Dollar Hemorrhage

Behind the export statistics lies a more troubling reality: Bangladesh is rapidly running out of foreign currency. Foreign Exchange Reserves in Bangladesh decreased to 29799.80 USD Million in July from 31772 USD Million in June of 2025. While government projections are optimistic, the interim government expects the country's gross foreign exchange reserves to rise to $34.4 billion by the end of the fiscal year (FY) 2025–26, the volatility reveals deep structural problems.

The crisis is more severe than official figures suggest. According to the finance ministry, a stable exchange rate, rising remittances, and higher interest rates across the financial sector will help boost reserves further. Yet these are band-aid solutions to a structural problem: an economy that imports almost everything it needs to produce the one thing it exports.

What makes this particularly dangerous is the import dependency for basic production inputs. The textile industry requires massive amounts of cotton, synthetic fibers, and chemicals almost all imported. When dollars become scarce, production stops immediately.

Power Outages and Production Paralysis

While the government struggles with foreign exchange, the energy crisis has reached critical proportions. Bangladesh is currently facing one of the most disruptive energy crises in recent months. Extended load shedding, acute gas shortages, and high fuel price hikes have severely impacted daily life and economic activity across the country.

The impact on manufacturing is devastating. Between June 2024 and May 2025, prices remained elevated, with diesel and kerosene fluctuating between BDT 104–108 per litre, petrol between BDT 121–127, and octane from BDT 125–131. Rising gas prices along with lowering supply have heavily affected the gas dependent industries such as textiles, glass, ceramic and steel industries.

In March 2024, the power generation shortfall reached 2,296 megawatts (MW), starkly contrasting the balanced supply-demand scenario in December 2023. For an industry that operates on razor-thin margins and tight delivery schedules, even brief power cuts can be catastrophic.

Power supply has been shut for an hour or two every day, rotating between areas throughout the country, while shops and malls have been ordered to close by 8 p.m., and government offices have been told to reduce electricity consumption by 25%.

The Human Cost: Mass Displacement and Unpaid Wages

The crisis has created a humanitarian emergency hidden behind export statistics. In the past year, at least 76 garment factories have shut their doors, pushing over 50,000 workers, predominantly women out of jobs. But factory closures tell only part of the story.

On the morning of Jan. 2, workers at four Keya Group apparel factories in Gazipur, Dhaka's garment district, received notice they would lose their jobs on May 1, International Workers' Day. The laborers had been abstaining from work since Dec. 29 while protesting for November paychecks they are still yet to receive.

This pattern is repeating across the industry. SM Fazlul Haque, the former president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), highlighted the dire circumstances facing the sector. "The garment industry is in distress. Aside from a handful of factories, most are struggling to turn a profit. The longer the machines operate, the greater the financial burdens become. If this trend continues, we will see even more factories go under".

The workers who remain employed face deteriorating conditions. Bangladeshi garment workers have one of the lowest wages in the world: the minimum monthly wage currently stands at 12,500 taka (about $113), far below the estimated local living wage of $460 per month.

Looking ahead, the situation may worsen dramatically. Despite the challenge posed by the advent of Industry 4.0 and the potential automation of production processes, panelists underscored a concerning projection of 60% of garment workers in Bangladesh could face unemployment in the RMG sector by 2030-2041.

The Inflation Trap: Crushing Ordinary Bangladeshis

While factories struggle with production costs, ordinary Bangladeshis are being crushed by inflation. Inflation Rate in Bangladesh increased to 8.55 percent in July from 8.48 percent in June of 2025. However, independent economists believe the real figure is higher, particularly for food prices.

While the economy is projected to grow modestly at 3% to 5% in FY25, inflation exceeding 10% remains a pressing concern that threatens both economic stability and social cohesion. This creates a vicious cycle: as the cost of living rises, workers demand higher wages, but factories operating on thin margins cannot afford to pay them.

As of January 2025, the country's point-to-point inflation rate is 9.94%, with a twelve-month average of 10.34%. For garment workers already earning subsistence wages, this represents an existential crisis.

Global Trade Wars Hit Home

The crisis has been exacerbated by changing global trade dynamics, particularly U.S. trade policy. Initially, it appeared Bangladesh would be devastated by U.S. tariffs. The US has imposed a 37% tariff on Bangladeshi garment exports, a sector that employs more than 4 million people.

However, the situation evolved in Bangladesh's favor. The Trump administration has lowered its reciprocal tariff on Bangladeshi goods to 20 percent from 35 percent, strengthening the country's competitive standing in the US market amid intensifying regional competition. This puts Bangladesh in a better position than its main competitors: India, the fourth-largest apparel supplier to the US, is set to face a 50 percent reciprocal tariff in the coming weeks, raising its total ETR to 66.5 percent.

What initially seemed like a heavy blow to Bangladesh's garment exporters has unexpectedly turned into a major opportunity, with many buyers who would previously source from China and India are now making initial negotiations for apparel orders.

But this silver lining comes with a cloud. As countries like China and India redirect their shipments to Europe at lower prices due to US tariffs, Bangladeshi suppliers may face stiffer competition in the European Union market, where they export over $25 billion annually.

The Structural Crisis: More Than Just Bad Luck

What we're witnessing is not simply a temporary downturn or the result of external shocks. Several factors have contributed to this crisis, including a downturn in international garment prices, which has placed financial strain on factory owners. European Union buyers have reduced their prices for Bangladeshi garments by 5 per cent, while US buyers have slashed prices by 8 per cent.

The energy crisis reveals decades of policy failure. Bangladesh has been struggling with primary energy supply since 2007, a long 17 years. Unfortunately, the focus was never to solve this fundamental problem sustainably but to build more power plants that are visible and carry larger political mileage.

As domestic gas supplies are expected to decline by 25% by 2025, the country's commitment to maintaining full electrification comes under question. The government's response has been to double down on imports rather than diversification: As a result, the government has doubled down on natural gas imports by focusing on long-term partners and contracts.

Regional and Global Implications

Bangladesh's crisis extends far beyond its borders. The country's position as the world's second-largest garment exporter means that production disruptions ripple through global supply chains. Fast fashion giants from H&M to Zara depend on Bangladeshi production for their low-cost business models.

The European Union remained the largest destination for Bangladesh's readymade garment (RMG) exports, accounting for 49.91 percent of total shipments, or $18.25 billion. The United States followed with exports worth $7.03 billion, reflecting a 19.23 percent increase.

When Bangladeshi factories go dark, Western consumers ultimately pay the price through higher clothing costs or supply shortages. The crisis exposes how deeply global consumption patterns depend on the economic stability of a single developing nation.

The Reckoning

Bangladesh's garment boom was built on what economists call "comparative advantage" the ability to produce textiles more cheaply than anyone else. But this advantage was always precarious, dependent on keeping wages low, environmental standards lax, and workers powerless.

This trade shock to Bangladesh could reverse decades of economic & welfare gains for women & girls. The industry that once represented women's economic empowerment is now displacing them through automation while failing to provide living wages to those who remain.

The current crisis represents more than economic hardship it's a reckoning with a development model that prioritized growth over sustainability, exports over domestic markets, and profit over people. Most garment workers are still fighting for decent wages in an industry that brings the most revenue to Bangladesh – and paying a heavy price for fighting for their rights.

As factories close and workers lose their livelihoods, Bangladesh must confront an uncomfortable truth: an economy built on a single industry, dependent on foreign markets and imported inputs, is not an economy at all it's a high-stakes gamble. And for millions of Bangladeshi workers, that gamble is now failing.

The question is not whether Bangladesh can return to the old model of export-led growth, but whether it can build something more sustainable before the social and economic fabric tears apart completely. The answer will determine not just the future of Bangladesh's 170 million people, but the stability of global supply chains that billions of consumers take for granted.