Moody's Investors Service ("Moody's") has today affirmed Bangladesh's long-term issuer and senior unsecured ratings at Ba3 and maintained a stable outlook.
The short-term issuer ratings stand at Not Prime.
Moody's gave the affirmation considering that the growth rebound following the pandemic will continue to anchor macroeconomic and external stability.
Relying on concessional borrowing also lowers debt refinancing risks. However, weak revenue generation capacity continues to reduce debt affordability and limits Bangladesh's fiscal flexibility, reports yahoo finance.
This results in a decline in the government's capacity to absorb inflationary pressures resulting from the energy and food price shock due to Russia's invasion of Ukraine.
The rating affirmation also considers increased vulnerability to future shocks as structural challenges have been exacerbated by the pandemic. The challenges include addressing infrastructure needs and low levels of human capital, both of which constrain greater foreign investment and limit prospects for economic diversification over the medium term.
Bangladesh' local-currency (LC) and foreign-currency (FC) ceilings are unchanged at Baa3 and Ba2, respectively.
Moody's expects real GDP growth to reach 6% in fiscal 2022 and 6.5% in fiscal 2023, driven by exports and domestic demand.
Nevertheless, the debt burden remains moderate, and Moody's expects it to remain below 40% of GDP over the next few years, anchored by strong growth.
Moreover, continued access to concessional funding (30% of Bangladesh's general government debt and more than 70% of government external debt), even after pandemic-related support expires, is key to mitigating debt financing costs.
As of December 2021, about 25% of loans in the banking system were restructured or rescheduled.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK.