Economy Desk: Fitch Ratings has downgraded the country’s credit rating despite predicting that the country’s economy will remain stable. The agency has downgraded Bangladesh’s long-term credit rating for the second time in eight months. One of the world’s leading credit rating agencies, the US institution, has upgraded Bangladesh’s foreign currency issuer default rating (IDR) from ‘BB minus’ to ‘B plus’. However, Fitch Ratings has kept the country’s economy-related forecast stable. While the long-term credit rating has been downgraded, Bangladesh’s short-term credit rating has been kept unchanged at ‘B’.
Besides, the long-term IDR in local currency has been downgraded from ‘BB minus’ to ‘B plus’; the short-term IDR in local currency is unchanged at B; and the country ceiling has been reduced from BB minus to B plus. Fitch uses this framework to rate a country’s long-term and short-term credit ratings. Earlier last September, Fitch downgraded Bangladesh’s long-term foreign currency issuer default rating (IDR) from stable to negative (BB minus); in other words, within eight months, the US company has again downgraded its debt. Fitch is one of the three credit rating agencies collectively known as the ‘Big Three’ in the world. The other two are Moody’s and S&P.
Fitch Ratings said the credit rating was downgraded to B+. Bangladesh’s foreign exchange reserves are weak in the long term. Despite taking many measures to prevent the loss of Bangladeshi reserves, this situation is not going to improve soon. Therefore, if there is a shock in the external sector of the economy, Bangladesh will become more vulnerable. Fitch Ratings believes that the measures taken by Bangladesh to prevent the decline of foreign exchange reserves in 2022 are not enough. It was not possible to deal with the dollar crisis in the domestic market with the help of these policies. The crawling peg system now adopted will increase the flexibility of the currency exchange rate. However, it is not clear that the foreign exchange market crisis will be dealt with or that the reserves will improve significantly with the help of this policy.
Fitch reports that their stable outlook means that Bangladesh’s economic situation will remain unchanged in the near future. This will be possible due to external financing agreements with reliable lenders such as the International Monetary Fund (IMF), the implementation of reforms directed by the organization and measures to address banking sector problems, keeping public debt within limits, and good growth prospects in the medium term. One of the main reasons for the decline in Bangladesh’s foreign exchange reserves is the non-flow of remittances through the banking channel. A large part of expatriate income is coming to the country through informal channels. In this situation, the country’s reserves decreased by 15 percent after January. Now the reserves have come down to 18.4 billion dollars. Fitch expects the reserve situation to stabilize due to the central bank’s recent measures.
