Fitch: Bangladesh to see rapid development, stabilizing its foreign exchange reservesFitch has again given Bangladesh a "BB-" rating in its most recent evaluation of its creditworthiness
October 1, 2022 9:43 AM
According to Fitch Ratings, a renowned international credit ratings firm, Bangladesh continues to have good growth prospects and a sustainable external debt repayment profile despite the global economic challenges and rising inflationary pressures domestically.
Fitch has again given Bangladesh a "BB-" rating in its most recent evaluation of its creditworthiness. Despite noting that there is commercial or financial flexibility to support the service of financial commitments, the assessment suggests an enhanced sensitivity to default risk.
The South Asian country is attempting to recover from the pandemic's aftereffects while also dealing with the consequences of the conflict in Ukraine, which have caused consumer expenditures to soar.
The government increased fuel prices by as much as 50% in response to the war's destabilizing effects on the world energy market. The country's foreign exchange reserves were also put under pressure, which was exacerbated by the depreciation of the taka versus the US dollar.
The pressure on the reserves is projected to decrease in light of policy steps to restrict imports, an increase in fuel price, and increased exchange-rate flexibility, it said. Despite the forex reserves declining 16% to $38.9 billion during an eight-month period during the previous fiscal year, it added.
According to Fitch, the foreign reserves would stabilize in FY23 and average $34 billion, which is sufficient to cover more than four months' worth of import payments.
Additionally, it anticipates a reduction in the current account deficit to 3.0% of GDP in 2023 and 2.3% in 2024.
Economic growth could drop to 5.0% in FY23 due to temporary measures taken to control imports and reduce electricity usage.
However, if these restrictions are relaxed and commodity prices are stabilized, it anticipates growth to increase to 6.4%.
Fitch has again given Bangladesh a "BB-" rating in its most recent evaluation of its creditworthiness