Fitch Ratings has revised its outlook on Bangladesh's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Negative from Stable, and affirmed the IDR at 'BB-', reports UNB.
Fitch’s rating action means the reputed credit rating agency is particularly concerned over Bangladesh’s ability to repay its foreign currency debts, although the situation for now remains ‘manageable’.
An IDR represents an assessment of an issuer's (such as a company or government) relative likelihood of defaulting on its financial obligations.
A Long Term Foreign Currency IDR indicates its ability to meet its financial obligations in foreign currency in the long term.
The downgrade was driven in large part by the country’s dwindling foreign exchange reserves, and the fact that it has been met with an inadequate response.
“The Negative Outlook reflects a deterioration in external buffers, which has increased vulnerability to shocks. It also reflects our view that the country's incremental policy response, including exchange-rate system changes, and continued support from external official creditors, has been insufficient to stem the fall in foreign reserves and resolve domestic US-dollar liquidity strains,” Fitch said.
“We forecast foreign-exchange reserves to stay under pressure, driven by rising imports and foreign-currency intervention by the central bank. We estimate that gross reserves fell by 19 per cent in 9M23 (first 9 months of 2023) to $27.3 billion, or $21.5 billion excluding the portion allocated to the Export Development Fund and Bangladesh Investment Development Fund,” it added.
Bd-pratidin English/Golam Rosul
