Standard & Poor’s (S&P) says Bangladesh faces the vulnerabilities of a low-income economy, fiscal constraints and heavy development needs.
In its annual rating released on Wednesday, it, however, reaffirmed the ‘BB-/B’ rating for the country, keeping a ‘stable outlook’ for the sixth consecutive year.
“The stable outlook reflects our expectation that Bangladesh’s steady growth path and strong donor support will endure to raise average income and sustain the country’s external profile over the next 12 months,” said the rating agency.
It also mentioned that these factors are balanced against lingering governance and fiscal weaknesses, infrastructure deficiencies, and inflation risks.
“The country’s volatile political setting combined with administrative and institutional weaknesses represent additional rating constraints,” S&P observed.
It also cautioned that it would lower the ratings “if Bangladesh undoes what it has achieved under the International Monetary Fund’s Extended Credit Facility programme”.
The rating agency, in the ratings score snapshot, described Bangladesh’s institutional assessment, economic assessment and fiscal assessment (debt burden) as weak, external assessment (flexibility and performance) and monetary assessment as neutral and only the external assessment as strong.
S&P, however, noted, “We may raise the ratings if measures aimed at expanding the revenue base and boosting collection efficiency materially improve fiscal performance.
Furthermore, it said, “we may also upgrade Bangladesh if the government materially reduces energy, infrastructure, and administrative bottlenecks and boosts investment, leading to a durable increase in trend growth for real per capita GDP (gross domestic product).”
Likewise, the rating agency may also raise the ratings if its monetary flexibility strengthens, evident in well-controlled inflation over a sustained period and deeper capital markets with market-based tools.
“We view Bangladesh’s monetary assessment as below average,” S&P said in its report.
It pointed out that the central bank’s limited independence, multiple mandates, and underdeveloped capital markets hamper monetary flexibility.
“Nonperforming loans remain high and capitalisation low in the banking sector, particularly at the state-owned banks,” S&P added.
– Prothom Alo