DCCI urges steps to ease lending rates to revive pvt invest

Dhaka Chamber of Commerce and Industry has called for measures to ease high lending rates and revive private investment, warning that elevated interest rates are squeezing credit and weakening economic activity.

DCCI President Taskeen Ahmed said rising lending rates, now exceeding 16%, have significantly discouraged both private and foreign direct investment, at a seminar at the DCCI auditorium today (9 March).

At a seminar at the DCCI auditorium on 9 March. Photo: TBS

The event, titled "Bi-annual Economic State and Future Outlook of Bangladesh Economy: Private Sector Perspective," highlighted growing concerns among businesses about the country's investment climate.

Taskeen said the sharp increase in borrowing costs has intensified the credit squeeze in the banking sector, with private-sector credit growth plunging to a record low of 6.10% in late 2025.

He urged the central bank to introduce targeted refinancing and credit guarantee schemes for SMEs and the manufacturing sector to stimulate productive lending.

Referring to data from the Bangladesh Bureau of Statistics, he noted that private investment fell to a decade-low of 22.03% of GDP in FY25. According to him, rising lending rates, structural constraints, political instability, weak law and order, and policy inconsistency have contributed to the decline.

Private and foreign investments are also being affected by currency devaluation and bureaucratic delays, he added.

Taskeen said monetary tightening alone will not be sufficient to control inflation and revive economic momentum. While food inflation has slightly eased, non-food inflation remains high at 9.13%, pushing overall inflation to 8.58% in January of FY26.

He said the government must complement monetary measures with supply-side initiatives, strict enforcement against hoarding, and reduced reliance on bank borrowing to ease pressure on the financial system.

Highlighting broader macroeconomic challenges, Taskeen warned that Bangladesh's economic stability remains fragile amid persistent inflation, banking-sector vulnerabilities, and a sluggish regulatory environment.

He stressed that the government must accelerate structural reforms, automate the taxation system, and strengthen revenue mobilisation. Currently, the tax-to-GDP ratio has fallen to 6.56%, which he described as a matter of serious concern.

Calling for an overhaul of the National Board of Revenue, he suggested introducing end-to-end digital tax services including e-registration, e-filing, e-payment, and e-audit, along with a centralised tax database integrating VAT, income tax, and customs.

Taskeen also recommended deferring Bangladesh's graduation from the least developed country category by at least three years and adopting a Smooth Transition Strategy that includes signing free trade agreements with regional blocs such as ASEAN, Mercosur, and the Eurasian Economic Union.

Addressing sector-specific challenges, he said the country's readymade garment industry — despite being the top export earner — has recently experienced negative growth and needs to shift toward higher-value apparel and expand the domestic market for man-made fibres.

He also pointed to problems in the leather sector, where poor preservation leads to the loss of 10-20% of rawhide, while the central effluent treatment plant at the Savar Tannery Industrial Estate is operating at less than half of the required capacity.

As a result, nearly 65% of Bangladesh's tanned leather is exported to China at about 60% lower prices due to the lack of internationally recognised compliance certifications among local producers, he said.

Taskeen also highlighted financing constraints faced by cottage, micro, small and medium enterprises. Nearly half of SME credit currently goes to the trading sector, while only 24% is directed to manufacturing, leaving small industrial producers short of capital.

He further noted that logistics costs in Bangladesh account for around 15-20% of GDP, almost double that of many developed economies, reflecting broader structural inefficiencies in logistics and energy.