Quick, effective action needed for private sector credit growth: DCCI
The DCCI stressed collaborative efforts between public and private sectors for a developed and inclusive growth-oriented economy
Quick and effective action is needed for private sector credit growth to foster competitiveness in the overall economy, Barrister Md Sameer Sattar, president of the Dhaka Chamber of Commerce and Industry (DCCI) has said.
He urged the government to lower business costs, facilitate loans for SMEs, boost import-substitution industries, maintain fiscal discipline, and prioritise development projects.
The DCCI through a press release said it expects these actions to swiftly enhance private sector credit flow and foster a business-friendly atmosphere.
The chamber stressed collaborative efforts between public and private sectors for a developed and inclusive growth-oriented economy, recognising the private sector's pivotal role.
Before the Covid-19 pandemic and the Russia-Ukraine war, Bangladesh was known as a role model for developing countries with an average growth of more than 6%.
As one of the driving forces of the country's economy, the private sector contributed significantly to growth through employment creation, investment attraction, productivity and trade expansion.
Currently, the private sector contributes more than 80% to GDP, of which industries contribute about 37%. The private sector continues to strengthen Bangladesh's local economy as well as contribute to the global value chain, said the release.
Continuing this steady progress, Bangladesh is on track to become a developing country by 2026 and a knowledge-based smart and advanced economy by 2041.
However, the role of investment in the private sector is immense in achieving this goal, the trend of the country's private sector investment has seen a downtrend in recent times, the DCCI said.
The private investment rate fell to 21.25% in FY21 due to the pandemic, which was the lowest in 14 years.
When the economy was beginning to recover from the pandemic shock, the Russia-Ukraine war and the complexity of the supply system hampered the country's economy.
As a result, 21.8% of GDP was achieved against the investment target of 24.8% in FY23. Despite various efforts of the government and other stakeholders in this regard, the credit growth of the private sector has not been achieved at the expected level.
In the first half of FY23, public sector debt was targeted at 43% and private sector debt at 10.9%.
This gap between the two sectors is one of the reasons for the low credit flow to the private sector, the chamber said.
Inflation and contractionary monetary policy, borrowing from the financial sector to meet rising government development expenditure and private sector investment have not been observed at desired levels.
Also, additional pressure on the foreign exchange market has had some impact in this regard, the release added.