Dhaka, Bangladesh (BBN)- Top global rating agency Standard & Poor's (S&P) has affirmed its 'BB-' long-term and 'B' short-term sovereign credit ratings on Bangladesh with a stable outlook for the consecutive fourth year.
“The stable outlook on the long-term rating reflects strong growth prospects and ongoing donor support, which ensure low-cost and long-maturity external debt and minimise refinancing risk,” the credit rating agency said in a research update.
The rating agency also said these factors are balanced against lingering fiscal and inflation risks, and the impact that rising political disturbances related to the coming elections could have on the real economy.
Bangladesh is rated second highest in South Asia behind India (BBB‐) and ahead of Sri Lanka (B+) and Pakistan (B‐). Other countries in the BB- category along with Bangladesh include Vietnam, Mongolia and Nigeria.
“We may raise the ratings if the government alleviates energy, infrastructure, and administrative bottlenecks, thereby boosting investment and growth prospects. We may also upgrade Bangladesh if measures aimed at expanding the revenue base and improving collection efficiency materially improve its fiscal performance,” the S&P also said.
“Conversely, we may downgrade the sovereign if fiscal slippages result in rising public debt and external donor support declines materially. We may also lower the ratings if the country substantially deviates from the policies required under the IMF Extended Credit Facility programme,” it noted.
The S&P also said: “We expect the main pillars of the economy--agriculture, remittances, and the garment export sector--to continue growing strongly in 2013-2016 as global demand recovers.”
Substantial bilateral and multilateral donor support improves policy formulation and provides direct budgetary assistance, the update said, adding that this donor support, together with foreign-sponsored education and health services to the general population, eases the burden on the Bangladesh government.
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 Standard Chartered Bank (SCB) and the Hongkong and Shanghai Banking Corporation Limited, generally known as HSBC worked as advisers to the Bangladesh government for S&P’s rating, while Citibank N.A. advised for rating from Moody’s.
Earlier on April 25 last, the Global credit rating agency Moody's Investors Service rated Bangladesh's outlook as stable for the fourth consecutive year with political and financial risks.
The credit rating agency said Bangladesh's Ba3 rating and stable outlook reflect Moody's assessment of four factors: its "low" economic, institutional and government financial strengths, as well as its "low" susceptibility to risks from financial, economic and political events.
The outlook for Bangladesh is 'Ba3', with a stable foreign and local currency bond ratings, according to the Moody's report.
BBN/SSR/AD-04June13-11:09 am (BST)
