Moody’s Investors Service has downgraded Bangladesh’s long-term credit rating to B2 from B1, marking its second consecutive downgrade in less than two years. The agency has also revised the outlook from “stable” to “negative,” reflecting increasing political and economic challenges. This is the first negative outlook since Bangladesh began receiving ratings from Moody’s in 2010.
The downgrade highlights heightened political risks, slower economic growth, and rising government liquidity and banking sector vulnerabilities. Following recent social unrest and political uncertainty, Moody’s projects GDP growth at 4.5% for FY24, down from its earlier estimate of 6.3%.
Bangladesh’s reliance on short-term domestic debt, rising treasury yields, and low fiscal revenues are key concerns. Additionally, Moody’s warns that weaknesses in the banking sector, exacerbated by high levels of non-performing loans, may further strain public finances.
The agency also notes external pressures due to declining foreign exchange reserves, now at $19.8 billion (3.2 months of import cover). Although remittance inflows and IMF support provide some relief, political instability and supply disruptions threaten the country’s export sector, especially ready-made garments.
Moody’s cautions that Bangladesh faces significant challenges in maintaining fiscal stability and implementing reforms under the current IMF program, especially amid political uncertainty and elevated inflation. With the country’s upcoming graduation from LDC status in 2026, export competitiveness may face additional hurdles.
The negative outlook suggests further risks to growth, which could worsen fiscal and external vulnerabilities in the coming years.
Source : The Business Standard
