Metropolitan Chamber of Commerce and Industry (MCCI) Wednesday urged the government to keep its borrowing from the banking system limited to the amount of Tk 230 billion proposed in new budget to avoid any crowding out effect on the private sector.
The chamber body also called upon the government not to raise the rate of advance income tax to 1.20 per cent on all exports and keep it at the present level of 0.6-0.7 per cent in order to provide relief, as export earnings are falling in the backdrop of the global financial crisis.
"In the name of containing inflation, investment should not be ignored as longer version of contractionary monetary policy will affect the industrial sector adversely for a period of 5-6 years," Barrister Nihad Kabir, MCCI vice president said at a seminar on budget 2012-13 jointly organised by the MCCI and the Policy Research Institute of Bangladesh (PRI).
The seminar titled views on budget 2012-13 was held at the MCCI conference room in the city.
On the other hand, analysts and economists at the seminar said the government's projected growth of gross domestic product (GDP) at 7.2 per cent, keeping inflation at 7.5 per cent, will be difficult to achieve during the next fiscal year.
They felt there were enormous challenges in implementing the proposed budget and expressed their doubt about the government's ability to deal with such challenges.
Former caretaker government adviser Dr Mirza AB Md Azizul Islam, PRI chairman Dr Zaidi Sattar, PRI executive director Dr Ahsan H Mansur, MCCI vice president Barrister Nihad Kabir, MCCI standing committee chairman on tax and tariff Anis A Khan, professor MA Taslim and former national board of revenue chairman Muhammad Abdul Mazid spoke at the seminar.
Speaking at the seminar, Mirza AB Md Azizul Islam said 7.2 per cent GDP growth proposed in the budget is based on the hope of increased confidence of development partners and foreign investors following extended credit facility by the International Monetary Fund (IMF), improved annual development programme (ADP) implementation and high interest rates on savings tools.
He said funds from development partners will be difficult to attract as they have their own terms on project implementation.
He said foreign investors do not care about the ECF agreement adding: "They want macro economic stability, stable political situation, availability of cheap labour force and sound infrastructure."
He said greater pace in ADP implementation is not possible.
Mr Islam said increase in interest rate on savings tools could help reduce bank borrowing and ensure private sector's better access to fund.
"I believe people's capacity to purchase savings certificates has been largely eroded following high rate of inflation," Mr Islam added.
He said the government should either cut its expenditure drastically or depend on bank borrowing.
He said: "I've reviewed 19 macro economic indicators of the outgoing fiscal and got only one which gives a glimmer of hope. That is remittance."
"The other indicator, tax mobilisation up to 19 per cent, is reasonably good. But it is weaker than last year's over 27 per cent," Mr Islam added.
