Moody's revises Bangladesh's outlook to ‘stable’ on easing political and external pressures

Credit ratings agency Moody’s on Tuesday revised Bangladesh’s credit outlook to “stable” from “negative” on easing political and external pressures.

“Despite higher import costs, gas supply volatility, and challenges to the ready-made garment sector, the economy has shown underlying resilience,” the agency said in its report.

Moody’s said the post-election transition and a strong government mandate had reduced political risks to reforms, while rebuilt foreign exchange reserves, exchange-rate flexibility and record remittances strengthened the country’s external position.

Prime Minister Tarique Rahman’s government, which took office in February, is pushing reforms while seeking fresh loans from international lenders including the International Monetary Fund as persistent inflation, slowing growth and pressure on foreign exchange reserves continue to weigh on the economy.

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The World Bank approved $1.1 billion in emergency financing for the South Asian nation in June to help secure food supplies, support vulnerable households and businesses due to the rising prices of fertilizer, fuel and food from the Middle East conflict.

Bangladesh is also negotiating a replacement for its existing $5.5 billion IMF bailout after it opted to exit the previous programme.

Moody’s affirmed Bangladesh’s long-term issuer rating at “B2”, citing a balance between the country’s long-term growth potential and persistent fiscal and banking sector vulnerabilities.

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The outlook revision contrasts with S&P’s decision in July to cut Bangladesh’s outlook to “negative” on banking woes and energy risks.