Dhaka, Bangladesh (BBN) – Global credit rating agency Moody’s Investors Service on Monday rated Bangladesh’s outlook as stable for the second consecutive year despite pressures on the country’s overall balance of payments (BoP).
“Tax reforms and infrastructure enhancement efforts are supporting Bangladesh’s Ba3 rating,” the Moody’s said, adding that the rating outlook is stable.
Moody’s rating put Bangladesh on a par with the Philippines. In the South Asian context, Bangladesh’s position is three-step higher than Pakistan and one-step higher from Sri Lanka, but below India.
“It’s a big achievement for Bangladesh. It will boost foreign investors’ confidence further to invest in Bangladesh,” Bangladesh Bank (BB) Deputy Governor Ziaul Hasan Siddiqui told reporters at a press conference Monday at conference room in the central bank.
Such rating put Bangladesh on a comfort position, he said, adding that it will also facilitate the country’s foreign trade.
Sovereign credit rating is a strong tool for positioning Bangladesh in the global financial arena by providing relevant information and related indicators about its overall economic situation, experts said.
“The rating would face downward pressure if a major shock to confidence, perhaps emanating from political or fiscal setbacks, or a deterioration of the balance of payments resulted in a substantial reversal of gains in the external payment position or adversely altered the improving trends in government and external debt trajectories,” the Moody’s said in its update report.
The top global rating agency said: “Bangladesh’s economy is treading the path to a higher growth potential, but is also facing modest near-term risks. With declining poverty, improved food security, favorable demographics, and recent efforts to enhance infrastructure, conditions for higher growth are visible.”
However, a recent deceleration of remittance inflows, and a rising trade imbalance are resulting in modest near-term pressures in the external balance of payments, it added.
Economic and banking event risks are low, and polarized politics do not threaten the policy framework, the rating agency said, adding that macro-financial stability, low external indebtedness, and improving banking fundamentals are key support factors.
“Excessive government interventions in the stock market or in state enterprises may raise contingent fiscal pressures somewhat. But, these are expected to remain within the liquid resources of the broader public sector,” it noted.
The policy framework is reasonably effective, but deeper reforms will sustain higher growth targets, the Moody’s said.
Citibank NA worked as an adviser for the Moody’s rating.
The Moody’s last rating action on Bangladesh was on April 12, 2010, at which time the local and foreign currency issuer ratings were assigned a Ba3, with a stable outlook.
BBN/SSR/AD-18Apr11-9:26 pm (BST)
