Private sector battered by global trade disruptions, inflation: DCCI

The country’s private sector faces challenges in making satisfactory progress as global trade disruptions resulting from the US-Israel war on Iran, uncertainty over energy supply, persistent inflation and weak investment weigh on business activities, a leading chamber said yesterday.

“Since a significant portion of energy used in Bangladesh’s industries is import-dependent, particularly from the Middle East, the ongoing conflict in the region has created uncertainty and tension in the private sector,” said Taskeen Ahmed, president of the Dhaka Chamber of Commerce and Industry (DCCI).

He made the remarks at a seminar on “Bi-annual Economic State & Future Outlook of the Bangladesh Economy: Private Sector Perspective” at the chamber’s auditorium.

The current conflict in the Middle East has also posed a serious threat to global trade and supply chains, he said. Additionally, the new tariff policy introduced by the US may negatively affect both domestic and global trade and investment.

The DCCI called for broadening the national tax base by bringing informal and underreported sectors into the tax net.

To improve efficiency, the DCCI recommended the introduction of end-to-end digital services, including e-registration, e-filing, e-payment, e-audit, and e-refund. It also suggested developing a centralised integrated tax database linking VAT, income tax, and customs.

On the monetary front, Ahmed urged the authorities to gradually ease the policy rate to support investment and stimulate economic growth.

Currently, Bangladesh Bank (BB) maintains a contractionary stance with the policy rate at 10 percent, while interest rates have risen to 16 percent and above, slowing private sector borrowing.

Mohammad Akhtar Hossain, chief economist at Bangladesh Bank, said that inflation currently stands at around 9 percent, and the Middle East crisis could result in further economic instability.

In such a situation, BB may need to adopt a contractionary monetary policy to control inflation, he warned, adding that excessive liquidity in the market and lower interest rates could create instability in the economy.

Mohammad Abu Eusuf, executive director at the Research and Policy Integration for Development (RAPID), highlighted the importance of restoring business confidence, as well as strengthening the confidence of bank depositors.

To tackle inflation, he emphasised coordinated efforts through fiscal policy, monetary policy and market management.

Zonayed Abdur Rahim Saki, state minister for finance and planning, said the government is well aware of the ongoing crisis in the Middle East and is closely monitoring the situation.

AK Enamul Haque, director general at the Bangladesh Institute of Development Studies (BIDS), said there are weaknesses in supply chain management that need to be addressed.

Monzur Hossain, member of the General Economics Division at the Bangladesh Planning Commission, said that to achieve the target of transforming Bangladesh into a $1 trillion economy by 2030, the country first needs to restore economic stability.

In this regard, manufacturing sectors should receive priority, and alternative financing mechanisms beyond the banking system should be introduced to ensure financing for SMEs.

Zaidi Sattar, chairman of the Policy Research Institute of Bangladesh (PRI), emphasised the need to reduce excessive dependence on tariffs and suggested that protection for domestic industries should be time-bound and rational.