Dhaka Chamber of Commerce and Industry (DCCI) recommended on Thursday rapid revival of smooth credit flow to the private sector for benefitting the country’s economy. It said while the economy was recovering from the pandemic repercussions, the Russia-Ukraine war heavily destabilised the global geo-economic scenario and supply system across the world, including Bangladesh.

As a result, the private-sector investment dropped and was recorded at 21.8 per cent of the gross domestic product (GDP), against the target of 24.8 per cent, in the fiscal year (FY) 2022-23 – 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 yet revived at the expected level.

Bangladesh has emerged as a role model for the developing countries, achieving an average 6.0 per cent plus GDP growth backed by consistent development in socioeconomic fronts.

The private sector has evolved as the key driver in Bangladesh, contributing significantly to the economy in terms of investment, production, trade and employment growth. Furthermore, the private sector has contributed greatly to build a strong local industrialisation base by creating SMEs and large businesses in diverse sectors that have strengthened and connected our local value chain with global value chain system.

The private sector was experiencing smooth investment until the Covid-19 pandemic and geo-economic crisis kicked off.

Due to the pandemic stress, the private sector investment to GDP ratio dropped to 21.25 per cent in FY 2021, which was the lowest in 14 years.

In the first half of FY 2023, public sector credit growth was targeted at 43 per cent, while private sector credit at 10.9 per cent.

This wide gap in targets between private and public sectors indicates and causes underperformance of private sector credit flow. The private sector investment has reduced due to rising development expenditure, relying on borrowing from the banks and non-banking financial institutions (NBFIs), meeting the huge budget deficit, soaring inflation, and contractionary monetary policy.

In addition, increased pressure on the foreign exchange has also affected private investment to some extent.

Amidst this context, to make both the private sector and the economy competitive, improved private sector credit growth is essential. The trade-body 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.

These focused and time-bound solutions are expected to improve pro-business environment in the economy and cease lowering private sector credit flow in no time, it opined.