International rating agency Moody’s Investors Service has reassessed Bangladesh’s rating unchanged at Ba3, which the central bank believes would help the country float its first ever sovereign bonds.
“Bangladesh’s Ba3 sovereign rating reflects our methodological assessment of economic strength that balances a medium-sized, but relatively narrow and low-income economy against a track record of steady growth, macroeconomic balance and policy stability,” Moody’s said in its report released on Saturday.
Like 2012, Moody’s gave Bangladesh Ba3 rating in 2010 and 2011 for long-term issuers (domestic and foreign currency). For short-term issuers, it rated ‘Not Prime’ meaning that it does not fall within any of the prime rating categories.
Bangladesh Bank (BB) hailed the achievement and termed it a ‘confidence on the economy’.
“Rating reflects a country’s capacity to repay liabilities. So, this rating will help us introduce sovereign bond,” Abu Hena Md Razi Hasan, newly appointed deputy governor of the BB, told The Daily Star in his reaction yesterday.
Sovereign credit rating is an important tool for positioning a country in the global financial arena by providing information on the overall economic situation.
Moody’s said large remittance inflows and the role of local micro-finance institutions have supported the overall economic performance of the country.
“The former (remittance) has underpinned an improvement in the country’s balance of payments, and the latter has heightened financial inclusion and established a critical social safety net that offsets the vagaries of a subsistence level per-capita income,” it said.
The rating agency said the country’s moderate degree of financial robustness reflects a comfortable external payments position and a steadily declining general government debt burden. However, it said the government’s fiscal flexibility and debt affordability are weaker than its rating peers.
Nonetheless, the country’s relatively high savings and small public-sector cash balances in the banking system alleviate credit concerns pertaining to debt rollover risks, it said.
Moody’s said the improving onshore finance-ability of government deficits is increasingly offsetting exchange rate risks of the government debt stock.
“And, lastly, event risks — that could be derived from abrupt political regime changes, policy shifts or economic and banking structure risks — are regarded as low and unlikely to result in a sudden or outsized deterioration in sovereign credit-metrics,” it said.
The deputy governor credited the BB for the stable rating. He said the central bank was able to keep the monetary policy stance within the targets. Exports and remittances performed well despite crisis in Europe and the US, he said.
“Growth in agriculture and services sector was also helpful to this rating,” said Hasan.
Moody’s rating has put Bangladesh on a par with the Philippines. In the South Asian context, Bangladesh’s position is three steps ahead of Pakistan and one-step higher than that of Sri Lanka, but below India.
S: http://www.thedailystar.net/newDesign/news-details.php?nid=220712
