Dhaka Chamber of Commerce and Industry (DCCI) has laid emphasis on reviving private sector credit to develop the country.
In a press release, DCCI Thursday observed that over the past decade, Bangladesh has emerged as a role model for developing countries, witnessing an average of six percent plus GDP growth backed by consistent growth in socioeconomic fronts.
The private sector has evolved as the key driver of the economic growth and employment generation in Bangladesh, contributing significantly to the economy in terms of investment, production, trade and employment growth.
Currently, the private sector contributes more than 80 percent to the GDP with 37 percent share of Industry to GDP. Furthermore, the private sector has contributed greatly to build a strong local industrialization base by creating SMEs and large businesses in diverse sectors that have strengthened and connected our local value chain with global value chain system.
As Bangladesh is on its journey towards graduating into a developing country by 2026 and aspires to become a knowledge based SMART and developed economy by 2041, the role of private sector investment in achieving this target is immense and instrumental.
It is worth mentioning that the economy was experiencing smooth private sector investment until Covid-19 pandemic and geo-economic crisis kicked off. Due to pandemic stress, private sector investment to GDP ratio has fallen 14 years lowest to 21.25 percent in FY2021.
While the economy was recovering from the pandemic repercussions, the Russia-Ukraine war has heavily destabilized the global geo-economic stability and global supply system including Bangladesh.
As a result, the private sector investment looked downward and recorded 21.8 percent against the target of 24.8 percent of GDP in FY2023 having manifold negative impacts on the economy. In this regard, despite various efforts by the government and other stakeholders, private sector credit growth has not revived yet at the expected level.
In the first half of FY2023, public sector credit was targeted at 43 percent while private sector credit at 10.9 percent. This wide gap in targets between private and public sectors indicates and causes underperformance of private sector credit flows.
It is observed that private sector investment has reduced due to the rising development expenditure relying on borrowing from Banks and NBFIs to meet the huge budget deficit, soaring inflation and contractionary monetary policy. In addition, increased pressure on the foreign exchange market has also affected private investment to some extent.
Amidst this context, to make both the private sector and the economy competitive, improving private sector credit growth is essential.
In this connection, President of DCCI Barrister Md. Sameer Sattar urged the Government to consider lowering the cost of doing business, easy access to credit for Micro, small and medium-sized enterprises (MSMEs), promoting import substitute industries, continuing the austerity measures and selecting priority-based development projects above all low-cost of borrowing may ease the private sector investment and credit growth to some extent.
“These focused and time-bound solutions are expected to change and improve the pro-business environment in the economy and cease the lowering private sector credit flow in no time. Taking the importance of the private sector as the lifeline of the economy into account, we need to exert shared and strategic efforts to enhance the private sector credit flow in order to steering the economy towards a higher and inclusive growth regime as well as much-needed economic graduation in the days to come,” he added.
