DCCI says tight monetary policy may blunt benefits of private sector-focused budget
DCCI President Taskin Ahmed said the decision to keep the policy interest rate unchanged at 10% despite private sector credit growth falling to 5% was "deeply disappointing" for businesses.
Highlights
- DCCI warns tight monetary policy may undermine pro-business budget
- Keeping policy rate at 10% despite 5% private credit growth 'deeply disappointing'
- Calls for better coordination between monetary and fiscal policies
- Welcomes Tk60,000 crore stimulus fund, urges transparent implementation
The Dhaka Chamber of Commerce and Industry (DCCI) has expressed concern that the country's tight monetary policy could undermine the intended benefits of the growth-oriented national budget aimed at boosting the private sector.
In a statement issued today (30 June), DCCI President Taskin Ahmed said the decision to keep the policy interest rate unchanged at 10% despite private sector credit growth falling to 5% was "deeply disappointing" for businesses.
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He said Bangladesh has pursued a contractionary monetary policy for the past four years, yet inflation has failed to ease as expected. Instead, inflation rose to 9.42% in May this year, the highest among South Asian countries.
According to the DCCI, the newly approved Tk9.38 lakh crore national budget includes a range of tax and duty incentives to encourage business expansion, investment and industrialisation. However, it said the central bank's monetary policy does not reflect the same pro-growth approach, indicating a clear mismatch between fiscal and monetary policies.
The chamber said maintaining a high policy rate has limited the scope for reducing borrowing costs, which could negatively affect business activities and investment.
However, the DCCI welcomed the Bangladesh Bank's Tk60,000 crore stimulus fund, stressing that lessons from past experiences should be used to ensure its transparent and effective implementation.
It urged the central bank to ensure that crisis-hit and struggling cottage, micro, small and medium enterprises (CMSMEs), export-oriented industries and other productive businesses can access the fund quickly and on easy terms.
The chamber also called for prioritising support for both closed industrial units that could be revived and businesses currently at risk of shutting down.
The DCCI further expressed concern over the government's increasing reliance on bank borrowing, noting that public sector credit growth has reached nearly 26%, well above the target.
It warned that the government's borrowing is absorbing a significant share of the banking sector's limited liquidity, potentially crowding out private sector access to credit.
The chamber said that regardless of how attractive the tax incentives announced in the budget may be, their expected benefits would be difficult to realise without adequate and affordable financing.
It therefore called for stronger coordination and greater policy alignment between monetary and fiscal authorities to address current economic challenges and support sustainable private sector-led growth.
