Economists and business leaders have advised the government against formulating a budget heavily reliant on bank borrowing, warning that such an approach could crowd out private sector credit and fuel inflation.
They stressed that limiting government borrowing from the banking system would help ensure greater access to loans for businesses, particularly at a time when the private sector needs stronger support to sustain growth.
The recommendations came during a pre-budget discussion on the financial sector held on Monday at Hotel InterContinental in the capital. The event was organised by the Dhaka Chamber of Commerce and Industry (DCCI) in collaboration with Bangla daily Samakal.
Speaking at the event, Bangladesh Bank Chief Economist Dr Akhtar Hossain said reducing government borrowing from banks should be a priority under current economic conditions.
He cautioned against adopting a populist budget, urging instead a contractionary and carefully calibrated fiscal plan to avoid exacerbating inflationary pressures.
“An expansionary budget at this stage could increase inflation and deepen hardship for ordinary people,” he said, adding that improvements in tax administration — including digitalisation and a shift towards cashless transactions — would enhance transparency and revenue collection.
Sharif Zahir, chairman of United Commercial Bank, highlighted the high level of non-performing loans (NPLs) in Bangladesh’s banking sector, describing it as a major concern.
He noted that NPL ratios exceed 30 per cent in Bangladesh, significantly higher than in neighbouring India and Pakistan. He also pointed to an overall capital shortfall of around 3 per cent in the banking sector and called for a comprehensive framework to reduce bad loans.
Mominul Islam, chairman of the Dhaka Stock Exchange, emphasised the need to bring more small and medium-sized enterprises (SMEs) into the capital market.
He also called for greater transparency, suggesting that all ministries and public institutions publish their income and expenditure data online.
Hossain Khaled, chairman of City Bank and a former DCCI president, urged the government to take steps to channel undisclosed income into productive investments, warning that failure to do so could lead to capital flight.
He also recommended fully online tax payment systems to minimise direct contact between taxpayers and officials.
Khaled further proposed reducing the corporate tax rate for banks to between 25 and 30 per cent to strengthen capital formation. He added that simplifying business processes — from starting operations to closing and restarting ventures — would improve the overall business environment.
Commerce Minister Khandaker Abdul Muktadir attended the event as chief guest, while DCCI President Taskin Ahmed chaired the sessions of the pre-budget dialogue.