Outlook stable, Moody's says
Moody's Investors Service has projected Bangladesh's outlook as stable again for the current year, but said a fractious political environment threatens rating.
The country's growth volatility is lower than that of almost all other countries rated by the global credit ratings agency, it said.
Bangladesh is rated Ba3 with a stable outlook, Moody's said yesterday.
Bangladesh's Ba3 foreign currency government bond rating reflects its track record of macroeconomic stability, a modest debt burden, and limited external vulnerabilities with an ample foreign reserve buffer.
However, a narrow tax revenue base and a very low level of per capita income are some challenges that may constrain the rating, it said.
The analysis elaborates on Bangladesh's credit profile in terms of economic, institutional and fiscal strength, and susceptibility to event risk, which are the four main analytic factors in Moody's sovereign bond rating methodology.
On economic strength, the country was assessed as moderate (-), on institutional strength as very low (+), on fiscal strength as low (-) and on susceptibility to event risk as moderate.
Growth expanded by 6.1 percent last fiscal year, and is expected to rise at a similar pace this year. At these levels, GDP growth is significantly above the 3.5 percent median for peers in the Ba-rating category.
However, potential growth is constrai-ned by infrastructure deficiencies, Moody's said, adding that volatile political situation remains a looming risk to Bangladesh's robust economic performance.
Bangladesh saw its longest ever political blockade, associated with strikes, in its history in the last few months, which turned deadly as more than 100 people were killed in largely horrific petrol bomb attacks and the economy lost 1 percent of GDP.
Although fiscal deficits are manageable, public finances are constrained by weak revenue collections. The government has recently embarked on wide-ranging revenue reforms based on automated systems.
Moody's said such reforms, if successful, would result in a considerable widening of the tax base.
Following two consecutive years of surpluses, the current account slipped into the negative territory this fiscal year due to a widening trade deficit. However, the country's financing needs are modest and easily met through low-cost, concessional external borrowing, while foreign reserves are buoyant and near a record high.
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