Deteriorating investment climate threatens growth, says MCCI on FY26 budget

The Metropolitan Chamber of Commerce and Industry (MCCI) has voiced serious concerns over the country's deteriorating investment climate, which has dropped to its lowest level in the past 10 years. 

The warning came in response to the proposed National Budget for fiscal year 2025-2026, presented by Finance Adviser Salehuddin Ahmed on Monday.

In a press release issued today (3 June) and signed by Hasan Mahmood, chairman of MCCI's Tariff and Taxation Committee, the chamber highlighted that investment has dropped to a troubling 29.38% of GDP in FY 2024–2025. This decline affects both the public and private sectors and has led to fewer employment opportunities and a rise in poverty. 

MCCI attributed the decline to a weakening investment environment compounded by official complexities and inadequate infrastructure, intensifying the ongoing economic crisis. 

While congratulating the finance adviser for presenting the country's 54th national budget amid challenges such as shrinking export markets, high inflation, and global conflicts, MCCI stressed that the current investment trend is alarming.

The proposed budget totals Tk7.9 lakh crore—12.7% of GDP—slightly below the current year's original budget but 6.18% higher than the revised one. It sets aside Tk2.3 lakh crore for the Annual Development Programme (ADP) and aims for a 6.5% GDP growth. 

Revenue collection is targeted at Tk5.64 lakh crore, with Tk4.99 lakh crore expected from the National Board of Revenue and the rest from other sources.

MCCI warned that implementation will be difficult without major reforms in tax policy, automation, and administration. It urged expanding the tax net instead of burdening existing taxpayers. 

The projected deficit is Tk2.26 lakh crore (3.62% of GDP), to be financed through Tk1.01 lakh crore in external and Tk1.25 lakh crore in domestic borrowing—mostly from banks. MCCI cautioned that IMF-backed tax reforms could widen the deficit and strain taxpayers.

The government's plan to borrow Tk1.04 lakh crore from banks—a 5.05% rise from this year's revised target—could crowd out private sector investment and trigger inflation if sourced from the central bank. MCCI called for restructuring the banking sector to ensure strategic and balanced financial management. 

The chamber also criticised a 14% cut in social safety net allocations, urging greater focus on inclusive growth. Persistent issues like weak infrastructure, uneven energy distribution, poor revenue collection, and sluggish ADP execution remain key growth barriers.

MCCI expressed disappointment over proposed turnover tax hikes, calling for its withdrawal and arguing it contradicts fair tax policy. It proposed expanding definitions of public offerings, removing caps on employee benefits, and allowing actual expenses under income tax rules. 

While welcoming the shift to quarterly tax deduction at source returns, the chamber urged broader tax base expansion, citing low return filing rates and Dhaka-Chattogram-centric revenue.

It supported raising the tax-free income threshold but deemed the increase inadequate. The chamber stressed digitalisation, simplified tax processes, and people-friendly reforms to boost the tax-to-GDP ratio, now only around 9%.

MCCI also criticised the lack of VAT Act reforms and called for zero advance tax on non-refundable industrial imports. It welcomed the VAT adjustment extension and pushed for wider use of e-invoicing and fiscal devices, simplification of VAT credits, and elimination of complex rules.

The chamber recommended quarterly reviews of budget execution and pledged to work with the government to promote transparency, economic reform, and inclusive growth.