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The Bangladesh Chamber of Industries (BCI) has emphasised the need to bridge the budget deficit by reducing government expenditure and borrowing at lower rates from domestic banks, while also increasing reliance on foreign sources. They argue that high-rate bank borrowing will exert pressure on private-sector investment.
In a press release issued on Saturday, the trade body stated that high inflation, increasing government expenditure, a stagnant tax-to-GDP ratio, and depleting reserves have made budget formulation challenging, making economic stability restoration crucial.
BCI President Anwar-Ul-Alam Chowdhury (Parvez) highlighted, "The government's contraction policy and the Bangladesh Bank's tight monetary policy encourage banks to invest in bonds and the government to borrow from banks. Additionally, rising interest rates in banks lead to a liquidity crisis."
"This will exert pressure on private-sector investment, and private-sector credit growth will be slower," he added.
Anwar-Ul-Alam further noted, "Achieving the 6.5 per cent inflation and 6.75 per cent GDP growth targets in the proposed budget will be challenging. However, the proposed budget lacks sufficient measures to control inflation, which has remained above 9 per cent for 14 consecutive months."
He pointed out that this year, the growth rate of new investments has declined to 6.6 per cent, while the unemployment rate is rising, with approximately 1,20,000 people losing their jobs, resulting in the increased cost of doing business for current industries.
"To control inflation, sustain the economy, and maintain employment, it is crucial to maintain the normal flow of money to support the current industry even in the absence of new investments," he emphasised.
Anwar-Ul-Alam expressed concerns about exports not meeting expectations, minimal remittance inflows, and dwindling reserves. He also criticised the proposed 1 per cent duty on imported raw materials and capital equipment in the EPZ industry, urging a reassessment of the proposal.
"The proposed budget is not ambitious. Although the budget deficit has been reduced to 4.6 per cent of GDP, there is still a deficit of Tk 1,60,900 crore, which will be collected from internal sources," he stated.
BCI opposed the provision in the proposed budget to whiten black money by paying a 15 per cent tax, considering it a discouragement for legitimate money earners.
"Raising the tax-to-GDP ratio is not achievable by merely increasing the tax rate on existing taxpayers. The number of taxpayers needs to increase, targeting over 1 crore. The proposed budget should include specific directives to expand the tax net," Anwar-Ul-Alam emphasised.
In the new proposed budget for the fiscal year 2024-25, the tax-free income limit for individuals remains unchanged at Tk 3.5 lakh. "Considering the current economic situation and inflation, we reiterate the proposal to raise the tax limit to Tk 5 lakh," he stressed.
While the tax rate for companies has been conditionally reduced by 2.5 per cent, Anwar-Ul-Alam finds this condition unrealistic in the context of Bangladesh. He reiterated the proposal to unconditionally reduce the tax rate by 2.5 per cent to attract investment.
