Lankan Ranger
ELITE MEMBER
- Joined
- Aug 9, 2009
- Messages
- 12,550
- Reaction score
- 0
Bangladesh Country rating stable
Moody's Investors Service, a US-based credit rating agency, has rated Bangladesh Ba3, the third non-investment grade rating, for the second consecutive year and termed the country's outlook stable.
A track record of steady growth, macroeconomic and policy stability and the government's history of full and timely debt service to all its creditors have helped the country maintain the good rating despite being a narrow and supply-constrained economy.
Both Bangladesh Bank and Moody's Investors Service published the rating report from Dhaka and Singapore yesterday.
"Overall economic performance has been supported by remittance inflows, garment exports and local microfinance institutions," remarked the rating firm in its statement.
Export and remittance have underpinned an improvement in the country's balance of payments (BOP) while microfinance has established a critical social safety net that offsets the vagaries of a subsistence-level per capita income, it said.
"Although external pressures are rising somewhat, a manageable external position and the government's comfortable debt-service burden reflects the country's moderate financial health," said the agency.
However, the government's fiscal flexibility and debt affordability are weaker by comparison, mainly due to low tax base, it said.
Bangladesh Bank Governor Dr Atiur Rahman said the Moody's rating on Bangladesh reflects the country's dynamic efforts to maintain macroeconomic stability.
Sovereign credit rating is supposed to create confidence and help a country get access to low-cost capital for development. It is a vital international benchmark, which should have favourable impacts on foreign direct investment (FDI) and portfolio flows. A good rating can help a country's businesses and have a positive impact on business costs.
But there are debates about the benefits Bangladesh got from the last year's good ratings by both the S&P and Moody's. Neither the government nor the central bank tried for any low-cost funds from external sources to strengthen its BOP. Besides, FDI Inflow did not increase.
This year, Moody's assessment was based on four key factors -- economic strength, institutional strength, government financial strength and susceptibility to event risk.
The firm said the country's economic growth will be supported by several policy reforms that are undertaken amid declining poverty and food self-sufficiency. The agency found reforms in the tax system is to widen the revenue base, comprehensive measures to reduce the electricity deficit and enhance infrastructure and ease transport and freight bottlenecks.
"With falling fertility rates and rising age-dependency ratios, Bangladesh should be able to generate higher national income and larger domestic savings," said Moody's.
An ongoing uptick in shipbuilding, information technology and IT-enabled services is gaining attraction. "This will broaden the export base over the medium term," it said.
But the near-term risks include declining remittances and rising costs in fuel and capital goods import. Shallow capital market has been identified as an institutional weakness.
On the recent legal action against Grameen Bank founder Muhammad Yunus, the rating firm said the issue has attracted widespread attention. But aside from the possibility of delays in disbursements or loan approvals, this is unlikely to rupture Bangladesh's relations with its main international creditors and donors, the agency observed.
Country rating stable
Moody's Investors Service, a US-based credit rating agency, has rated Bangladesh Ba3, the third non-investment grade rating, for the second consecutive year and termed the country's outlook stable.
A track record of steady growth, macroeconomic and policy stability and the government's history of full and timely debt service to all its creditors have helped the country maintain the good rating despite being a narrow and supply-constrained economy.
Both Bangladesh Bank and Moody's Investors Service published the rating report from Dhaka and Singapore yesterday.
"Overall economic performance has been supported by remittance inflows, garment exports and local microfinance institutions," remarked the rating firm in its statement.
Export and remittance have underpinned an improvement in the country's balance of payments (BOP) while microfinance has established a critical social safety net that offsets the vagaries of a subsistence-level per capita income, it said.
"Although external pressures are rising somewhat, a manageable external position and the government's comfortable debt-service burden reflects the country's moderate financial health," said the agency.
However, the government's fiscal flexibility and debt affordability are weaker by comparison, mainly due to low tax base, it said.
Bangladesh Bank Governor Dr Atiur Rahman said the Moody's rating on Bangladesh reflects the country's dynamic efforts to maintain macroeconomic stability.
Sovereign credit rating is supposed to create confidence and help a country get access to low-cost capital for development. It is a vital international benchmark, which should have favourable impacts on foreign direct investment (FDI) and portfolio flows. A good rating can help a country's businesses and have a positive impact on business costs.
But there are debates about the benefits Bangladesh got from the last year's good ratings by both the S&P and Moody's. Neither the government nor the central bank tried for any low-cost funds from external sources to strengthen its BOP. Besides, FDI Inflow did not increase.
This year, Moody's assessment was based on four key factors -- economic strength, institutional strength, government financial strength and susceptibility to event risk.
The firm said the country's economic growth will be supported by several policy reforms that are undertaken amid declining poverty and food self-sufficiency. The agency found reforms in the tax system is to widen the revenue base, comprehensive measures to reduce the electricity deficit and enhance infrastructure and ease transport and freight bottlenecks.
"With falling fertility rates and rising age-dependency ratios, Bangladesh should be able to generate higher national income and larger domestic savings," said Moody's.
An ongoing uptick in shipbuilding, information technology and IT-enabled services is gaining attraction. "This will broaden the export base over the medium term," it said.
But the near-term risks include declining remittances and rising costs in fuel and capital goods import. Shallow capital market has been identified as an institutional weakness.
On the recent legal action against Grameen Bank founder Muhammad Yunus, the rating firm said the issue has attracted widespread attention. But aside from the possibility of delays in disbursements or loan approvals, this is unlikely to rupture Bangladesh's relations with its main international creditors and donors, the agency observed.
Country rating stable
