Bangladesh was assigned its first sovereign rating by Moody’s Investors Service of Ba3, the same as the Philippines and Vietnam, after withstanding external shocks and political unrest to achieve economic stability.
The South Asian nation’s rating, three levels below investment grade, has a stable outlook, the company said in a statement today. Moody’s action comes almost a week after Standard & Poor’s Ratings Services assigned Bangladesh a BB- ranking, also three steps below investment grade.
“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 stage of development,” said Aninda Mitra, a vice president and sovereign analyst for Moody’s in Singapore.
Bangladesh, which has had at least five military coups since independence from Pakistan in 1971, ended two years of military-backed emergency rule in December 2008 when a political alliance headed by former Prime Minister Sheikh Hasina Wajed’s Awami League swept back to power in national elections. It has no immediate plans to sell bonds on international markets, Iqbal Abdullah Haroon, a Finance Ministry official, said today.
“The economy has also ably withstood several recent external shocks, periods of domestic political stress and supply-side bottlenecks,” Mitra said. Trade liberalization has helped the economy grow an average of 6 percent in the past decade, he said.
‘Investor Radar’
The ratings will help bring Bangladesh to the attention of investors, said Rahul Bajoria, an economist at Barclays Capital in Singapore.
“Bangladesh is appearing on the investor radar simply because of its fundamental appeal,” he said. “Positive demographics, rising consumption, and stable growth is a big positive.”
Bangladesh’s export dependence on the garment industry may be a constraint on its ratings, Mitra said. Its impending tax overhaul is “particularly important” in supporting its credit outlook, he said. The International Monetary Fund, in a February report, said Bangladeshi officials reaffirmed their intention to submit new legislation on the value-added tax and the lender urged the country to push through with plans for reforms on the levy.
“This will not only support improved fiscal flexibility and debt affordability but the reforms will also underpin much- needed expansion of public development expenditure,” Mitra said. “However, despite the generally positive trends in the government’s debt trajectory, debt affordability and fiscal flexibility face more pressure than do most of its rating peers.”