Government debt can hinder the flow of credit to the private sector

The president of Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) Mahbubul Alam said that excessive government debt from the banking system can hinder the flow of credit to the private sector. He said, as a result, investment and employment could be adversely affected.

He said this at a press conference organized on Saturday (June 8) on the proposed budget 2024-25. At this time, Metropolitan Chamber of Commerce and Industry (MCCI) President Kamran T Rahman, Dhaka Chamber President Ashraf Ahmed and members of the Board of Directors of FBCCI and businessmen were present.

The FBCCI president said that the deficit in the proposed budget is Tk 2 lakh 56 thousand crore, which is 4.6 percent of the GDP. Although the budget deficit for the current financial year was 5.2 percent.

He said that the government will have to take Tk 1.60 thousand 900 crore from internal sources to meet the deficit. Out of this, 1 lakh 37 thousand 500 crores should be taken from the banking system. Along with that, the government has to bear the burden of interest. Excessive borrowing by the government from the banking system hinders the flow of credit to the private sector. As a result, investment and employment may be adversely affected.

In order to meet the budget deficit, instead of the local bank system, the scope of the social safety net has been increased in the Nazar budget for financing from foreign sources with as low interest and caution as possible. We believe that these initiatives will strengthen social security and contribute positively to the social economy. However, it must be ensured that this benefit reaches the actual beneficiaries properly.

He said it is necessary to ensure business-friendly revenue management and reform the National Board of Revenue to collect revenue as per the target. Along with that, it is necessary to increase the tax-GDP ratio, increase the tax coverage and expand the tax office to upazilas. In this regard, we presented detailed proposals to the government in the meeting of the National Budget Advisory Committee.