The government's FY2026-27 budget offers tax cuts, investment incentives and other measures aimed at encouraging businesses to expand.
However, economists say many firms remain hesitant to invest because the cost of borrowing remains high and other structural problems persist.
They argue that lower taxes alone are not enough to drive private investment when financing and business conditions remain challenging.
Economists say businesses make investment decisions based on a combination of factors rather than tax incentives alone.
Although the budget reduces operating costs through tax measures and other incentives, companies still have to borrow money to expand, and that borrowing remains expensive.
A business owner may save money from lower taxes, but those savings can quickly be offset if working capital loans carry interest rates of 14-15% and repayments on long-term loans continue to strain cash flow.
As a result, financing costs remain a bigger obstacle to investment than tax rates for many businesses.
They also point to weaknesses in the banking sector. Private sector credit growth has slowed to 4.7%, reflecting not only high interest rates but also banks' reluctance to lend amid a sharp rise in classified loans.
Classified loans account for more than 32% of total loans, prompting banks to hold on to liquidity instead of extending long-term credit to businesses.
Businesses also consider several other issues before making new investments.
These include the reliability of energy supply, the ease of doing business, political stability, financing costs and expected consumer demand.
While the budget addresses some of these concerns, it does not resolve problems such as energy shortages or weak demand caused by years of high inflation.
The report also warns that government borrowing could further limit private investment.
If revenue collection falls short of the budget target, the government may need to borrow more from the banking system.
That would leave fewer funds available for private sector loans, making it even harder for businesses to access credit.
Economists say this combination of high borrowing costs, banking sector weaknesses and limited credit availability continues to discourage private investment despite the government's expansionary fiscal measures.
fiscal policy / Private investments / Monetary policies
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