DCCI flags policy rate-budget mismatch

The Dhaka Chamber of Commerce and Industry (DCCI) has voiced strong concern over Bangladesh Bank’s decision to hold the policy rate steady at 10 percent, calling the move “highly disappointing” for businesses as private sector credit growth slowed to 5 percent in May.

A contractionary monetary stance maintained over the past four years has failed to rein in inflation, which instead rose to 9.42 percent in May – the highest in South Asia, DCCI President Taskeen Ahmed said in a statement on Tuesday.

The chamber pointed to a disconnect between fiscal and monetary policy, noting that the newly approved Tk 9.38 trillion national budget carries tax and duty incentives meant to spur investment and industrialisation, but these growth-oriented measures find no echo in the latest monetary stance.

A prolonged high policy rate, it said, leaves little scope to ease borrowing costs for businesses.
DCCI called for closer coordination between fiscal and monetary policies to support private sector-led economic growth and ensure effective implementation of the government’s development initiatives.

DCCI welcomed Bangladesh Bank’s Tk 60 billion refinancing and incentive package, describing it as a timely initiative to revive business activities.

It urged the central bank to ensure transparent and efficient implementation of the fund so that cottage, micro, small and medium enterprises (CMSMEs), export-oriented industries and other productive sectors can benefit through simplified procedures and faster approvals.

The chamber also underscored the importance of extending priority support to businesses currently facing operational challenges to help preserve production, investment and employment.

Referring to private sector financing, DCCI said adequate credit flow would be essential to achieving the government’s investment and industrial growth objectives.

It also highlighted the need to maintain a balanced distribution of banking sector liquidity to support productive private sector activities.