'Defaults on loan payments are on the rise because of high interest rates'
The implementation of the proposed budget for FY19 will be a challenging task if the government fails to increase capacity and ensure transparency and accountability in different sectors, according to the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI)
The reaction came two days after Finance Minister AMA Muhith placed the Tk4.65 trillion budget for FY19 in the parliament on Thursday. The amount is over 16% higher than the budget of the outgoing fiscal year.
“Every year, we need to revise the proposed national budget as it lacks clarity about the source of funds and expenditure. To achieve the targets set out in the budget for FY19, there is a need for increasing capacity and ensuring transparency in every sector,” FBCCI President Md Shafiul Islam Mohiuddin said while speaking at a post-budget briefing in Dhaka’s Federation Bhaban on Saturday.
As the government has planned to borrow Tk42,000 crore from local banks to implement the budget, the FBCCI fears that the growing dependency on the banks might impede production and manufacturing processes.
On top of that, defaults on loan payments are on the rise because of high interest rates, Mohiuddin said.
Currently, default loans amount to Tk85,000 crore.
The FBCCI leader also demanded that those who were responsible for creating “anarchy” in the country’s banking sector be brought to book. “We want strict punishment for people involved in such bank robbery,” the FBCCI president said.
Reiterating his call to reduce the corporate tax rates on listed and non-listed companies by 2.5%, as has been proposed for banks and financial institutions, he said: “A reduction in the corporate tax rate will help bring the country more revenue.”
The FBCCI president further called for a reduction of the interest rate to single digits, to encourage investment from the private sector.
“The capital market and banks provide the finances required for the private sector. But the high rate of interest discourages them. We want a favorable capital climate and single digit interest rates,” he said.
Mohiuddin added that an emphasis on timely and quality execution of the Annual Development Program (ADP) was required to encourage investment from both local and overseas sources.
The FBCCI president also appreciated the various steps by the government in budget proposal to ensure social security.
He also appreciated the tax cuts in several different areas, including the customs duty on rice imports, duties on the import of raw materials for the steel industry, as well as duties on the import of raw materials for the pharmaceutical industry.
“There are a lot of people to be satisfied. In the areas where traders have objections, we will try to sit with high officials of the government and try to get them right.”
Mohiuddin also said: “The tax-free income limit has not been kept, which we did not want. We propose to reduce the tax-free income limit to at least Tk 3 lakh. Businessmen are being harassed by misuse of Article 120 on the Income Tax Ordinance. This is a black law. We demand the cancellation of Article 120 of the Act.”
FBCCI Senior Vice-president Sheikh Fazle Fahim, Vice-president Md Muntakim Ashraf and other directors of the federation were present at the briefing.