Reserves to stabilise at $34 billion
Bangladesh's foreign currency reserves may average $34 billion in the next fiscal year, which is enough to cover 4.7 months' import bills, said the American credit rating agency Fitch yesterday.
"However, we believe pressure on reserves should ease following policy measures to curb imports, a hike in administered fuel prices of nearly 50 percent and greater exchange rate flexibility," it said yesterday in its latest update on Bangladesh.
At present, the central bank's vaults have reserves amounting to $36.4 billion.
However, the measures to contain imports and curb electricity consumption would slow down economic growth to 5 percent this fiscal year.
Growth would pick up to 6.4 percent next fiscal year as the measures are eased along with a fall in commodity prices.
Bangladesh continues to hold "strong growth prospects" and a "manageable external debt repayment profile" without any refinancing stress in the near term.
But an IMF programme could benefit policy credibility and help Bangladesh navigate a challenging external environment posed by the Ukraine war and rising global interest rates.
Subsequently, it retained the BB- rating for Bangladesh. The country held this rating since 2014.
Fitch, however, sounded the alarms on the low government revenue, low per capita income, a weak banking sector and deficient governance indicators.
The tax-GDP ratio, at 9.8 percent in fiscal 2021-22, is a key credit weakness and much below the 27.3 percent 'BB' median.
Fitch also forecasted the budget deficit to slightly exceed the government's target of 5.5 percent for this fiscal year.
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