Bangladesh gets Moody's rating, outlook stable

Credit rating agency Moody's Investors Service yesterday for the first time assigned Ba3 to Bangladesh and termed the country's outlook stable.

The rating was released about a week after Standard & Poor's assigned BB- to the country amid much acclaim by the government and economists.

Moody's rating put Bangladesh on a par with the Philippines, Vietnam and Turkey. In the South Asian context, Bangladesh's position is higher than Pakistan and Sri Lanka, but below India.

In a statement, the US-based Moody's said the rating reflected Bangladesh's reasonable level of robustness in finance and balance of payments, and the prospects for continued microeconomic stability.

Bangladesh's relatively robust external position, and its strong foreign currency reserve were reasons behind getting the rating, Moody's said.

It added that these reflect Bangladesh's recent dynamic apparel exports, large remittance inflows, minimal foreign commercial borrowing and advantageous external debt servicing profile.

Moody's also assigned Ba2 to the country's foreign currency bond ceiling, B1 to foreign currency bank deposit ceiling, and Baa3 to long term local currency bond and deposit ceilings.

Bangladesh Bank Governor Atiur Rahman said Moody's rating on Bangladesh reflects the country's dynamic efforts to maintain macroeconomic stability.

“The rating is slightly lower than India, but three steps ahead of Pakistan and equivalent to the Philippines,” Rahman told reporters at his office.

In a statement released yesterday, Aninda Mitra, Moody's vice president and lead sovereign analyst for Bangladesh, said: "The combination of a conservative institutional framework for managing the economy, supported by capital controls, has ensured better external balance and price stability than at many other emerging markets at a similar levels of development."

Bangladesh achieved a steady rate of economic growth of 6 percent in the past decade, said the analyst. He attributed the success to policy stability, underlying demographic shifts and an increasing rate of trade openness.

"The economy has also withstood several recent external shocks, periods of domestic political stress and supply-side bottlenecks," he added.

Expressing his reactions on the rating, Mamun Rashid, Citi country officer in Bangladesh, said this is an exceptional result considering Moody's traditional conservative outlook.

Citibank NA worked as an adviser for Moody's rating.

"These are exceptional results that convey global recognition of the resilience and potential of the Bangladesh economy," he said, adding that gains for Bangladesh from this rating are manifold.

"The rating will create confidence and provide access to capital for development. This is a vital international benchmark, which should have favourable impacts on FDI and portfolio flows," he added.

However, Moody's found Bangladesh's relatively high industrial and export dependence on the ready-made garments sector as a rating constraint, suggesting broader sustained industrial diversification, supply side and financial sector reforms, and regional economic integration.

The country faces more pressures from debt affordability and fiscal flexibility than most of its rating peers, it said. In this regard, Moody's pointed to low revenue collection of only 12 percent of GDP.

Mitra said: "The government's absolute parliamentary majority should support a broad emphasis on economic reforms, regional integration and political reconciliation."

He hoped with caution that "narrow identity or ideological politics and capacity constraints may slow down the pace of reforms but are unlikely to derail the economic policy framework."

>>Source: The Daily New Age, April 13, 2010