Moody’s Ratings has updated Bangladesh’s sovereign outlook from ‘negative’ to ‘stable,’ citing reduced political tension, higher foreign exchange reserves, and historic remittance levels.
In its latest evaluation, Moody’s noted that post-election stability and strong public support for the new government have minimized risks to ongoing reforms. Financial backing from the IMF and other international institutions remains vital.
Moody's had previously lowered Bangladesh’s rating from 'B1' to 'B2' in March 2025 with a negative outlook, pointing to bank asset degradation, high inflation, and sluggish growth.
The long-term issuer and senior unsecured ratings stay at ‘B2,’ while the short-term rating remains ‘Not Prime.’
Banking insiders expect this adjustment to expand foreign credit lines for local banks, aiding trade imports.
Moody’s reported reserves grew to roughly $32.9 billion by mid-2026—covering over four months of imports—up from $21.4 billion in 2024. This recovery was fueled by formal remittance channels, flexible exchange policies, and market-driven currency reforms.
Economic expansion is projected to recover slowly, moving from 3.5% in FY2024–25 to 4.1% in FY2025–26, 4.3% in FY2026–27, and potentially 4.9% in FY2027–28 as industrial output stabilizes.
Inflation is expected to hover around 9%.
The sovereign rating was capped at ‘B2’ due to systemic financial sector vulnerabilities, with non-performing loans (NPLs) hitting approximately 32.8% of total loans.
Addressing these capital deficits to meet international standards could require recapitalization equal to 10% of GDP, placing severe strain on public finances.
However, a 12% annual surge in deposits through March 2026 suggests the sector suffers from structural bad debt rather than liquidity shortages.
Bangladesh's low tax-to-GDP ratio restricts fiscal policy, with debt interest payments consuming nearly 30% of government revenue, even though overall public debt stays manageable.
Additional hazards include energy infrastructure vulnerabilities highlighted by recent LNG terminal disruptions, alongside potential losses in trade preferences and concessional loans as Bangladesh graduates from LDC status.
