Moody’s Ratings has changed the outlook of Bangladesh’s sovereign credit rating from ‘negative’ to ‘stable’. The positive change was brought about by declining political and external sector pressures, accumulating foreign exchange reserves and record remittance inflows, the credit rating agency said. Recent elections, a smooth political transition and the overall majority of the people in favor of the Government of Bangladesh have substantially lessened the likelihood of political uncertainty to hamper the reform processes at play. Additionally, ongoing economic pledges to the International Monetary Fund and other institutional partners are key in obtaining needed financial support to the country.
The ratings of the country have improved, but it was not downgraded by Moody’s from ‘B2′ and ‘Not Prime’ for the long-term issuer and senior unsecured rating, respectively. High inflation, weak growth and profound financial sector uncertainties were the culprits in the first downgrade in March 2025 to ‘B2′. But, this latest revision of the outlook should bring tangible benefits sooner than later to global trade. Foreign banks are expected to resume or expand dollar credit facilities to domestic banks, helping to make letters of credit (LCs) easier to open, financial experts say. In a bid to further drive the economic momentum and import of much-needed capital machinery for industries, Bangladesh bank is now proactively working on a Tk 6000 crore incentive package to spur credit growth in the private sector and to help the industries to recover.
Some positive developments at the macroeconomic level can be noted in the recent reports issued by the Ministry of Finance. In response to better formal remittance flows and a more liberalized and market-oriented foreign exchange mechanism, total foreign exchange reserves reached about $32.9 billion by the middle of 2026, which is considerably higher than the $21.4 billion mark in the previous year. The accumulated reserves can now cover more than four months of import financing. According to the most recent forecasts, GDP growth is expected to stand at 4.3% in FY 2026-27 and may reach 4.9% in FY 2027-28, while domestic inflation is expected to remain around 9%.
Yet, the underlying structural issues remain, even with the favourable economic indicators. Moody’s has maintained the ‘B2’ rating mainly on the back of continued weaknesses in the banking sector with the number of non-performing loans (NPLs) at approximately 32.8% of all disbursed loans. This alignment with international standards could be a huge recapitalisation programme, costing 10% of GDP. This is a big challenge in view of the very low revenue-GDP ratio in Bangladesh where nearly 30% of the total government revenue is already being spent on payments of interest on debt. The nation is also exposed to infrastructure risks, including the recent disruptions at its LNG terminals, and is in need of proactive measures to deal with a rise in pressure on its competitiveness as an exporter once it exits the United Nations‘ list of least developed countries (LDCs).
