Govt's reliance on bank borrowing to put pressure on private sector credit, say business leaders
However, the FBCCI and DCCI welcomed the budget and said they would analyse it further and provide a more detailed opinion later
Business leaders affiliated with the Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) and Dhaka Chamber of Commerce and Industry (DCCI) said the government's reliance on borrowing from banks to meet the budget deficit for the 2024–25 fiscal year will put pressure on the private sector.
They made the comment while expressing their initial thoughts on the proposed national budget for FY25 during a press conference on Thursday.
FBCCI President Mahbubul Alam said, "The proposed budget of Tk7.97 lakh crore has been announced in the Parliament. Of this, Tk1.37 lakh crore will be borrowed from banks. This is high. If the government takes this money from banks, then we businessmen may face complications in borrowing money. I think it would be better if the deficit could be filled by taking loans from abroad."
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DCCI President Ashraf Ahmed said, "The government's bank borrowing target is almost 11.82% lower than the last fiscal year. But it is still high. If government borrowing increases, private sector credit flow may shrink."
However, both organisations welcomed the budget and said they would analyse it further and provide a more detailed opinion later.
The proposed budget for the fiscal year 2024-25 is logical and realistic given the current global economic recession, said FBCCI President Alam.
"The budget is logical and realistic. The government and private institutions can work together to implement it. The government has prioritised national interests in the budget," he said in an immediate reaction at the FBCCI office in Dhaka.
"If the government borrows from domestic banks to meet the budget deficit, businessmen will not get loans. Therefore, the FBCCI calls on the government to take more loans from abroad," he added.
Alam further noted, "We called for the withdrawal of the Advance Income Tax (AIT) as part of facilitating ease of doing business in the country. But it was not withdrawn."
The FBCCI president also proposed to increase the tax-free income limit to Tk4,50,000 from Tk3,50,000.
DCCI President Ashraf Ahmed welcomed the initiative of the prospective tax system for the fiscal years 2024–25 and 2025–26, saying it is a good move and may help boost FDI.
He said, "This year, the government has tried to increase revenue collection while containing inflationary pressure on the economy by controlling budget deficits, reducing various import duties, and imposing an advance tax on various essential products. Import duty on almost 30 essential products has been reduced, which is a good move."
He also suggested a separate tax code for the SME sector, as the tax administrative system is a bit complex for them.
"This year's budget deficit target is about 4.6%, which is lower than previous years. It is implementable, but the main challenge is revenue collection. Without widening the tax net, it will be difficult to collect higher revenue. However, we need to increase the tax-to-GDP ratio," he added.
Replying to a journalist's question, he said the government has reduced various taxes and VAT, but on the other hand, a few items will see an increase. Overall, it may not impact businesses too harshly.
The main challenge this year will be implementing the good initiatives in this budget, he added.
Both for listed and non-listed companies, the corporate tax rate has been reduced by 2.5% conditionally, which is a good move, he mentioned.
Ashraf also stressed the importance of ADP implementation for sustainable socio-economic development. Finally, he thanked the government for proposing a budget that tries to address inflation, foster local investment, diversify exports, widen the tax net, and reduce dependency on the financial sector to ease.
