government of bangladesh – ba3 stable

SOVEREIGN AND SUPRANATIONAL

ISSUER IN-DEPTH26 March 2019

RATINGS

BangladeshForeign

CurrencyLocal

Currency

Gov. Bond Rating Ba3/STA Ba3/STA

Country Ceiling Ba2 Baa3

Bank Deposit Ceiling B1 Baa3

TABLE OF CONTENTSOVERVIEW AND OUTLOOK 1CREDIT PROFILE 2Economic strength: Moderate (+) 2Institutional strength: Low (-) 6Fiscal strength: Moderate (-) 9Susceptibility to event risk: Moderate 12Rating range 17Comparatives 18DATA, CHARTS AND REFERENCES 19

Contacts

Christian Fang [email protected]

Allister Lim +65.6311.2669Associate [email protected]

Gene Fang +65.6398.8311Associate Managing [email protected]

Marie Diron +65.6398.8310MD-Sovereign [email protected]

Government of Bangladesh – Ba3 stableAnnual credit analysis

OVERVIEW AND OUTLOOKThe credit profile of Bangladesh (Ba3 stable) is supported by robust economic growthprospects, a modest government debt burden and access to concessional funding. Continuedmacroeconomic stability, including low growth and inflation volatility and the absence ofboom-bust credit cycles, points to some effectiveness in macroeconomic policies. We expecteconomic activity in Bangladesh to remain strong over the next few years, driven by theready-made garment (RMG) industry, which contributes to exports, job and wealth creation,and broader GDP growth. Ongoing implementation of the government’s large infrastructureprojects will further support domestic demand. We also expect the government’s debtburden to remain relatively low and stable, given its track record and commitment to keepdeficits modest.

Credit challenges include a very narrow government revenue base that constrains thegovernment’s capacity to spend on physical and social infrastructure development, lowper capita income and limited economic diversification that reduce the economy’s shockabsorption capacity, and infrastructure, human capital and institutional constraintsthat weigh on the country’s global economic competitiveness. We expect Bangladesh'sgovernment revenue/GDP to remain among the lowest of the sovereigns we rate, even asour baseline assumptions include some, but not all, of the revenue increase planned by thegovernment. The government’s infrastructure projects will relieve some of the constraintsto economic competitiveness and diversification, but only partially meet the economy’s fastgrowing demand for infrastructure.

The stable outlook reflects balanced risks to Bangladesh’s credit profile. Triggers for anupgrade include (1) improvements in the fiscal environment, including a significant increasein the government’s revenue generation capacity and lower cost of financing, that wouldincrease debt affordability and the fiscal space; and/or (2) material progress in developingcritical physical infrastructure and institutional and economic reforms that would raiseeconomic competitiveness, income levels and the economy’s shock absorption capacity.

The rating could be downgraded if (1) the debt burden increased sharply, possibly throughlarge borrowing to fund infrastructure projects that do not provide commensurate economicreturns; (2) the banking sector’s financial health weakened, particularly for state-ownedbanks, with rising contingent liability risks to the government; and/or (3) political tensionsincreased and undermined macroeconomic policy stability.

This credit analysis elaborates on Bangladesh’s credit profile in terms of economic strength,institutional strength, fiscal strength and susceptibility to event risk, which are the four mainanalytic factors in our Sovereign Bond Rating methodology.

http://www.surveygizmo.com/s3/1133212/Rate-this-research?pubid=PBC_1165700

https://www.moodys.com/credit-ratings/Bangladesh-Government-of-credit-rating-806356877

https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1151027

MOODY'S INVESTORS SERVICE SOVEREIGN AND SUPRANATIONAL

CREDIT PROFILEOur determination of a sovereign’s government bond rating is based on the consideration of four rating factors: economic strength,institutional strength, fiscal strength and susceptibility to event risk. When a direct and imminent threat becomes a constraint, that canonly lower the preliminary rating range. For more information please see our Sovereign Bond Rating methodology.

Economic strength: Moderate (+)

Scale VH+ VH VH- H+ H H- M+ M M- L+ L L- VL+ VL VL-

+ Final -

Factor 1: Sub-scores

weight 50% weight 25% weight 25%

Score for Bangladesh Median of countries with Ba3 rating

Factor 1: Overall score

Bangladesh Moderate (+)

Economic strength evaluates the economic structure, primarily reflected in economic growth, the scale of the economy and wealth, as well as in

structural factors that point to a country’s long-term economic robustness and shock-absorption capacity. Economic strength is adjusted in case

excessive credit growth is present and the risks of a boom-bust cycle are building. This ‘credit boom’ adjustment factor can only lower the overall score of economic strength.

Note: In case the Indicative and Final scores are the same, only the Final score will appear in the table above.

SCALE OF THE ECONOMY NATIONAL INCOMEGROWTH DYNAMICS

Average real GDP (% change) Volatility in real GDP growth (ppts) Global Competitiveness index Nominal GDP (US$ bn) GDP per capita (PPP, US$)

VERY HIGH

HIGH

MODERATE

LOW

VERY LOW

GROWTH DYNAMICS

Bangladesh's “Moderate (+)” economic strength balances the country’s very low per capita income and very low competitivenessagainst robust GDP growth prospects, supported by the continued growth of the RMG industry, sustained increases in employment andhousehold incomes, and remittance inflows.

Other countries with a similar economic strength score include Pakistan (B3 negative) and Sri Lanka (B2 stable).

Bangladesh, like many of its South Asian neighbours, is vulnerable to climate change risks as identified in our report on environmentalrisks and their impact on sovereigns. The country's low-lying land and coastal position exposes it to flooding, which can create negativeeconomic and social costs. Meanwhile, the magnitude and dispersion of seasonal monsoon rainfall influence agricultural sector growth,generating some volatility and raising uncertainty about rural incomes and consumption.

Exhibit 1

Bangladesh M+ Median Sri Lanka Pakistan Costa Rica Vietnam Bahrain Nigeria

Ba3/STA B2/STA B3/NEG B1/NEG Ba3/STA B2/STA B2/STA

Final score M+ M+ M+ M+ H- H- M

Indicative score M+ M M+ M+ M H M-

Nominal GDP (US$ bn) 249.7 91.5 87.4 305.0 58.4 220.5 35.4 376.4

GDP per capita (PPP, US$) 4,229.9 26,153.5 12,862.6 5,377.6 16,894.2 6,927.8 49,005.8 5,941.3

Average real GDP (% change) 6.9 3.2 4.0 4.6 3.2 6.4 3.0 2.7

Volatility in real GDP growth (ppts) 0.7 3.1 2.2 1.4 1.8 0.6 1.3 3.7

Global Competitiveness Index 3.9 4.3 4.1 3.7 4.5 4.4 4.5 3.3

Peer comparison table factor 1: Economic strength

Source: Moody's Investors Service.

2 26 March 2019 Government of Bangladesh – Ba3 stable: Annual credit analysis


https://www.moodys.com/credit-ratings/Pakistan-Government-of-credit-rating-600014774

https://www.moodys.com/credit-ratings/Sri-Lanka-Government-of-credit-rating-600023158




Robust growth prospects supported by the globally competitive RMG industry

Bangladesh's real GDP growth has been stronger compared with peers over the past decade, averaging 6.6% per year, significantlyhigher than the median of 4.0% and 4.2% for Ba- and B-rated peers, respectively (see Exhibit 2). Growth volatility has also been lowcompared with similarly rated peers.

Real GDP growth rose to 7.9% in the fiscal year ending June 2018 (fiscal 2018) from 7.3% in fiscal 2017, driven mainly by strongdomestic demand, as private sector credit growth continued to support private consumption while government capital spendingboosted investment (see Exhibit 3). However, net trade turned out to be a larger drag on growth because of a spike in imports,particularly for capital machinery and construction materials, because of the implementation of large infrastructure projects. Weexpect real GDP growth to remain strong at around 7.0%-7.5% in fiscal 2019 and fiscal 2020, underpinned by solid domestic demandamid continued growth in the RMG industry and ongoing infrastructure investment.

Exhibit 2

Bangladesh consistently grows at a quicker pace compared to peersReal GDP % year on year

Exhibit 3

Growth continues to be supported by robust domestic demandPercentage point contribution to % year on year real GDP

0

1

2

3

4

5

6

7

8

9

Bangladesh Ba median B Median

Note: Fiscal years ending June for Bangladesh.Source: Moody's Investors Service

-20

-15

-10

-5

0

5

10

15

20

Private consumption Government consumption

Private investment Public investment

Exports Imports

Statistical discrepancy Real GDP growth

Note: Fiscal years ending June.Sources: Bangladesh Bureau of Statistics, Moody's Investors Service

Bangladesh’s globally competitive RMG industry is a key driver of its high growth prospects. Manufacturing activity, led by the RMGindustry, contributes two to three percentage points to real GDP growth (see Exhibit 4) while RMG products make up more than 70%of total goods exports (see Exhibit 5). Although the industry does not employ a large proportion of the country’s workforce (just below7%), the associated wealth creation generates demand for goods and services domestically.

Exhibit 4

Manufacturing activity led by the RMG industry contributessignificantly to growthPercentage point contribution to GDP growth

Exhibit 5

RMG output accounts for more than 70% of exports fromBangladesh% of total exports

0

2

4

6

8

10

Others Transport, Storage & Communication

Wholesale and Retail Trade Construction

Manufacturing Agriculture and Forestry

Real GDP

Note: Fiscal years ending June.Sources: Bangladesh Bureau of Statistics, Moody's Investors Service

0

10

20

30

40

50

60

70

80

90

100

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Raw jute Jute goods incl. Carpet Leather

Fish & Shrimp Ready made garments Others

Sources: Bangladesh Bank, Moody's Investors Service



The competitiveness of Bangladesh's RMG industry is because of a combination of factors, including low wages contributing to costcompetitiveness (see Exhibit 6) despite the recently announced 40%-50% increase in wages across all seven grades for garmentworkers. Other factors include the ability to scale production in part through vertical integration, investment in modern technologyand sustainable processes in some factories that allow production to meet evolving consumer demand, as well as strong relationshipswith buyers of final RMG products, including global brands such as Adidas, H&M and Marks & Spencer (Baa3 stable). The industry hassteadily gained global market share over the past decade (see Exhibit 7).

Exhibit 6

Bangladesh’s RMG exports continue to gain global market share% of global apparel exports

Exhibit 7

Wages of garment workers in Bangladesh are low compared withkey competitorsMonthly wages on a purchasing power parity (PPP) basis

0

1

2

3

4

5

6

7

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Bangladesh Cambodia India Indonesia

Pakistan Turkey Viet Nam

Note: Exhibit does not include China, which is the largest exporter, accounting for 34% ofglobal apparel exports.Sources: World Trade Organization, Moody's Investors Service

0

100

200

300

400

500

600

700

800

Note: Grey portion reflects recent wage revisions in Bangladesh.Sources: McKinsey, World Bank, Moody's Investors Service

Low income levels, limited economic diversification constrain the shock absorption capacity of the economy

Despite consistently high and stable growth, income levels in Bangladesh remain one of the lowest among all rated sovereigns andcompared with similarly rated peers. GDP per capita in purchasing power parity (PPP) terms was just around $4,230 in 2017 (seeExhibit 8), implying a weak shock absorption capacity of the economy. In addition, we think economic diversification in Bangladesh isflattered by the size of the economy, given the importance of the RMG industry in generating wealth and export earnings.

Exhibit 8

Bangladesh's income levels are very low compared with most peers2017 levels

0

50

100

150

200

250

0

2

4

6

8

10

12

14

16

18

20

GDP Per Capita (000' $ PPP) Nominal GDP ($ Billion) - right axis

Sources: International Monetary Fund, Moody's Investors Service


https://www.moodys.com/credit-ratings/Marks-Spencer-plc-credit-rating-463500


Infrastructure, human capital and institutional constraints weigh on economic competitiveness, limit economicdiversification

Notwithstanding the highly competitive RMG industry, Bangladesh's global economic competitiveness ranks very low comparedwith similarly rated peers, with infrastructure, human capital and institutional constraints commonly cited as key challenges to doingbusiness in the country. These challenges are evident, for instance, in Bangladesh's logistics ranking and level of educational attainment(see Exhibits 9 and 10).

Exhibit 9

Bangladesh’s logistics performance ranking is lowRank out of 160 countries, 2018

Exhibit 10

Enrolment rates in secondary education in Bangladesh continue tolag peers% enrolment in secondary education, 2017

3239 41

44 46

5660

65

73

82 84

92 93 9498 100

119122

131 133137

141

0

20

40

60

80

100

120

140

160

Sources: World Bank, Moody's Investors Service

0

20

40

60

80

100

Sources: World Bank, Moody's Investors Service

Inadequate physical infrastructure continue to constrain Bangladesh's manufacturing and export capacity and limit diversificationprospects. Road traffic is congested, rail routes are limited and the only major seaport in Chittagong servicing exports is limited incapacity and not deep enough for large container vessels to dock. While the construction of power plants have largely addressedprevious economic challenges relating to energy shortages, more investments will be needed to meet increasing demand.

The government aims to reduce these constraints by focusing on the implementation of its infrastructure investment programme,particularly the nine remaining mega-infrastructure projects on fast-track, which include two deep sea ports, Bangladesh's first massrapid transit network in the capital, Dhaka, a road-rail bridge and power plants. These projects are targeted to be completed between2019-23. Additional and newer infrastructure may relieve some of the constraints on the economy, but demand for infrastructureis growing fast. We think it is likely that such demand will only be partially met, with the economic returns materialising over a longperiod.

Furthermore, the relatively low quality of human capital limits opportunities for the country to move up the value-added chain.Despite an abundant labour supply, Bangladesh's economy continues to face a shortage of skilled managers and specialists. Otherconstraints are institutional in nature, such as complex administrative procedures stemming from a large bureaucracy, lengthy judicialand bankruptcy processes, and weak corporate governance, which raise operational risks in the country and deter foreign investment.

To increase the country’s economic competitiveness, the government set up the Bangladesh Investment Development Authority (BIDA)in 2016 to improve the business environment and attract foreign investment. One of BIDA’s main goal is to be a one-stop shop forinvestors by amalgamating the functions of 15 government agencies, including business registration, dealing with construction permits,registering property, getting electricity, obtaining credit and paying taxes. However, the one-stop shop is not yet in full operation.



Institutional strength: Low (-)


+ Final -


Low (-) Median of countries with Ba3 ratingScore for Bangladesh


weight 75% weight 25%

Institutional strength evaluates whether the country’s institutional features are conducive to supporting a country’s ability and willingness to repay its debt. A related aspect of institutional strength is the capacity of the government to conduct sound economic policies that foster economic growth and

prosperity. Institutional strength is adjusted for the track record of default. This adjustment can only lower the overall score of institutional strength.


Bangladesh

POLICY CREDIBILITY AND EFFECTIVENESSINSTITUTIONAL FRAMEWORK AND EFFECTIVENESS

Worldwide GovernmentEffectiveness index Worldwide Rule of Law index

Worldwide Control of Corruptionindex Inflation level (%)

Inflation volatility (standarddeviation)

VERY HIGH

HIGH

MODERATE

LOW

VERY LOW

Our assessment of Bangladesh’s “Low (-)” institutional strength balances effective macroeconomic policies that are conducive toongoing macroeconomic stability against weaknesses in government effectiveness, control of corruption, and weak credibility in itslegal structures. These challenges are reflected in the country's Worldwide Governance Indicators (WGI) and limit efficacy in long-termmeasures to improve the quality of infrastructure and human capital.

Other countries with a similar institutional strength score include Azerbaijan (Ba2 stable), Ethiopia (B1 stable) and Mongolia (B3 stable).

Exhibit 11

Bangladesh L- Median Ethiopia Mongolia Azerbaijan Maldives Cambodia Pakistan

Ba3/STA B1/STA B3/STA Ba2/STA B2/NEG B2/STA B3/NEG

Final score L- L- L- L- L- VL+ VL+

Indicative score L- VL+ L- L L VL VL-

Gov. Effectiveness, percentile [1] 9.7 25.3 11.1 32.0 35.0 25.3 12.6 18.6

Rule of Law, percentile [1] 18.6 23.1 25.3 34.3 23.1 21.6 6.7 15.6

Control of Corruption, percentile [1] 14.9 17.9 26.1 35.0 12.6 17.9 4.4 19.4

Average inflation (%) 5.9 4.9 8.7 6.0 4.9 1.9 3.1 5.7

Volatility in inflation (ppts) 1.4 4.0 13.2 7.1 6.5 4.4 7.2 4.5

Peer comparison table factor 2: Institutional strength

[1] Moody's calculations. Percentiles based on our rated universe.Source: Moody's Investors Service.

WGI rankings reveal institutional and governance challenges

We gauge the institutional framework and effectiveness in a country on the basis of a country’s WGI scores for governmenteffectiveness, rule of law and control of corruption. Based on the WGIs for 2017, Bangladesh’s rankings in all three areas are lowerthan the median for similarly rated peers as well as other countries in South Asia (see Exhibit 12). Although there has been someimprovement in Bangladesh’s scores since 2012, particularly in rule of law, the country’s ranking fell because of strong improvements inother countries that we rate (see Exhibit 13).


https://www.moodys.com/credit-ratings/Azerbaijan-Government-of-credit-rating-806356890

https://www.moodys.com/credit-ratings/Ethiopia-Government-of-credit-rating-806356915

https://www.moodys.com/credit-ratings/Mongolia-Government-of-credit-rating-806356900


Exhibit 12

Bangladesh's WGI indicators are weaker than peersPercentile rank, 2017

Exhibit 13

Bangladesh's WGI rankings have remained broadly stable at lowlevelsPercentile rank

0

10

20

30

40

50Political Stability

Government

Effectiveness

Rule of Law

Control of Corruption

Voice and

Accountability

Regulatory Quality

Bangladesh Median - Very Low F2

Median - Ba Pakistan

Note: Percentile rank based on Moody's universe of rated sovereignsSources: Worldwide Governance Indicators, Moody's Investors Service

0

2

4

6

8

10

12

14

16

18

20

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Government Effectiveness Rule of Law Control of Corruption

Note: Percentile rank based on Moody's universe of rated sovereignsSources: Worldwide Governance Indicators, Moody's Investors Service

Low WGI rankings would, compared with higher-ranked sovereigns, limit the efficacy of long-term measures to raise economiccompetitiveness and/or the quality of human capital. Weak rule of law and control of corruption would also deter foreign investment,which can otherwise boost the country’s longer-term growth potential. Notably, control of corruption has been listed as the topconstraint to doing business in Bangladesh by the World Economic Forum. The legal system, particularly the uncertainty related tothe length and outcome of judiciary processes, has also been exploited by borrowers to disrupt default proceedings, resulting in highercredit risk and nonperforming loan levels in the banking system.

The government of Prime Minister Sheikh Hasina, re-elected in December 2018, is focusing on tackling corruption and improving therule of law, although our global experience suggests that improvements are likely to be slow and gradual with vested interests posingimplementation challenges.

Stability in inflation and the domestic economic environment point to some policy effectiveness

Inflation in Bangladesh is generally stable, but higher than most similarly rated peers given the country’s higher rates of growth (seeExhibit 14). Inflation fluctuated at around 5.4% year-on-year over the first eight months of fiscal 2019, compared with an averageannual inflation of 5.8% over fiscal 2018 and 5.4% over fiscal 2017. Higher oil prices in the first few months of fiscal 2019 were offsetby lower food prices since the beginning of 2018, which kept inflation steady. We expect inflation to remain around similar levels,averaging 5.3% over fiscal 2019 and fiscal 2020, with the potential for lower-than-expected inflation should food prices remain muted.The government is targeting an inflation rate of 5.6% for fiscal 2019.

The stability in consumer price growth has occurred within a broader environment of macroeconomic stability and an absence ofcredit boom-bust cycles (see Exhibit 15). Real and nominal GDP growth in Bangladesh have also been stable over the past decadedespite global growth shocks. The ongoing macroeconomic stability demonstrates some policy effectiveness, in our view. In particular,monetary and fiscal policies have been prudent and conservative. Moderate reserve money growth – Bangladesh Bank’s (BB, the centralbank) operational target – anchors credit growth and inflation expectations. Adherence to fiscal deficit limits of 5% of GDP also fostersmoderate inflation and reduces growth volatility arising from procyclical fiscal policy.



Exhibit 14

Inflation has been close to target in recent years...Annual % change

Exhibit 15

… while credit growth has been modest since 2013Annual % change

4%

5%

6%

7%

8%

9%

10%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

CPI target Annual CPI


17.4

19.9

14.4

21.0

16.1

17.8

27.6

19.5

11.011.6

10.0

14.2

11.2

14.7

0

5

10

15

20

25

30

2005-11 avg = 19.2%

2012-18 avg = 13.2%


Countering the macroeconomic policy effectiveness are shortcomings in the prudential policy for the financial system and persistentdelays to fiscal reforms (more under banking sector risk and fiscal strength).

Moreover, we think Bangladesh’s large and complex bureaucracy – which requires coordination and multiple layers of approvals –overlapping mandates between government ministries and/or agencies, and gaps in essential macroeconomic data (such as quarterlyGDP estimates), limit the speed and quality of policymaking.



Fiscal strength: Moderate (-)


+ Indicative Final -


weight 0%

Fiscal strength captures the overall health of government finances, incorporating the assessment of relative debt burdens and debt affordability as

well as the structure of government debt. Some governments have a greater ability to carry a higher debt burden at affordable rates than others.

Fiscal strength is adjusted for the debt trend, the share of foreign currency debt in government debt, other public sector debt and for cases in which

public sector financial assets or sovereign wealth funds are present. Depending on the adjustment factor the overall score of fiscal strength can be

lowered or increased.



Bangladesh

weight 100%

Moderate (-) Score for Bangladesh Median of countries with Ba3 rating

General government debt (% of GDP) General government debt (% of revenues)General government interest payments (%

of revenue)General government interest payments (%

of GDP)

VERY HIGH

HIGH

MODERATE

LOW

VERY LOW

DEBT AFFORDABILITYDEBT BURDENDEBT BURDEN

We have set Bangladesh's fiscal strength at “Moderate (-)”, below the indicative score of “Moderate”, to reflect the constraints posedby the government’s very narrow revenue base to capital spending for infrastructure and social development and debt affordability.

The low government debt burden and access to concessional funding, which mitigates debt affordability risks, partly offset these fiscalconstraints. However, the cost of domestic, non-concessional funding is high, in part because of the increased issuance of NationalSavings Certificates (NSCs), which pay a spread over government bonds and serve a social protection function, in recent years.

Other countries with a similar fiscal strength score include Papua New Guinea (B2 stable) and Vietnam (Ba3 stable).

Exhibit 16

Bangladesh M- Median VietnamPapua New

Guinea

Cote d

IvoireFiji Georgia Montenegro

Ba3/STA Ba3/STA B2/STA Ba3/STA Ba3/STA Ba2/STA B1/POS

Final score M- M- M- M M M M

Indicative score M M M+ M- M+ M H+

Gen. gov. debt/GDP 27.0 50.3 51.8 31.2 43.4 48.0 44.2 64.9

Gen. gov. debt/revenue 264.2 202.8 201.2 204.4 219.1 173.5 153.2 156.3

Gen. gov. interest payments/GDP 1.8 2.1 2.0 2.0 1.8 2.7 1.3 2.4

Gen. gov. int. payments/revenue 17.6 10.7 7.7 13.2 8.9 9.7 4.4 5.7

Peer comparison table factor 3: Fiscal strength



https://www.moodys.com/credit-ratings/Papua-New-Guinea-Government-of-credit-rating-600045988

https://www.moodys.com/credit-ratings/Vietnam-Government-of-credit-rating-600023790


Fiscal deficits to remain contained, despite larger infrastructure spending and higher interest payments from NSCs

Fiscal deficits in Bangladesh have averaged 3.6% of GDP over the past decade, a modest level for a fast-growing economy andconsistent with the government's commitment to keep deficits within 5% of GDP. The fiscal deficit widened to 4.8% of GDP in fiscal2018 from 3.4% in fiscal 2017, mainly as a result of higher capital spending on infrastructure projects (see Exhibit 17). Tax revenuerose strongly by 30% in fiscal 2018, up from an average increase of 13% over the five years prior, but was more than offset by the76% increase in government expenditure on its Annual Development Programme (ADP). We think part of the reason behind thesharp increase in ADP spending was to accelerate the implementation of large infrastructure projects ahead of the general election inDecember 2018.

We expect the fiscal deficit to narrow slightly and hover around 3.5%-4.5% of GDP over fiscal 2019 and fiscal 2020 despite thegovernment's large infrastructure investment programme, given its track record in adhering to its deficit limit and meeting its deficittargets. That said, the increased issuance of NSCs, if persistent, will pose fiscal risks as these retail savings instruments pay higherinterest compared with domestic government securities. NSCs accounted for more than a third of government debt as of the end offiscal 2018, up from a quarter of government debt two years prior (see Exhibit 18).

Exhibit 17

Fiscal deficits will remain moderate and below the government's5% limit(Left axis: BDT billions; Right axis: % of GDP)

Exhibit 18

Government borrowing from NSCs has increasedOuter ring: Fiscal 2018; Inner ring: Fiscal 2016; % of total government debt

-6

-5

-4

-3

-2

-1

0

-5000

-4000

-3000

-2000

-1000

0

1000

2000

3000

Tax revenue Nontax revenue

Foreign grants current expenditure

ADP others

Fiscal balance % GDP (rhs)

Fiscal deficit limit at 5% of GDP

Note: Fiscal years ending June.Sources: Bangladesh Ministry of Finance, Moody's Investors Service

34%

25%

41%

26%

34%

40%

Domestic commercial (Non-NSC) debt National Saving Certificates

External concessional debt

Sources: Bangladesh Ministry of Finance, Moody's Investors Service

Because NSCs are demand-driven, the higher interest offered compared with bank deposits and other savings instruments, as well asadministrative challenges in monitoring the eligibility criteria and investment limit for each individual on the paper-based system haveresulted in a significant increase in their issuance.

The government is aiming to reduce the share of government borrowing through NSCs over time. Immediate plans include migratingthe application for and issuance of NSCs to a fully electronic and automated platform that is linked to individual national and taxidentification numbers, which would increase administrative compliance, and the creation of a digital database that could allow thegovernment to streamline its NSC offerings and set interest rates appropriately. The electronic platform was piloted in February 2019and the government plans to roll out the system to the entire Dhaka metropolitan area by the end of March 2019, and to the wholecountry by the end of June 2019.

Weak revenue generation capacity weighs on debt affordability

Despite moderate fiscal deficits, the government’s revenue generation capacity is one of the weakest among our rated sovereigns,which reduces debt affordability and constrains its ability to spend on infrastructure and social projects that would raise the country'seconomic competitiveness and potential. Government revenue amounted to around 12% of GDP in fiscal 2018, one of the lowestamong sovereigns we rate, while interest payments as a percentage of government revenue is among the highest, indicating low debtaffordability (see Exhibits 19 and 20).



Exhibit 19

Government’s revenue generation capacity is among the lowestamong our rated sovereignsGovernment revenue as % of GDP, 2018

Exhibit 20

… which results in low debt affordability compared with peersInterest payments as % of government revenue, 2018

0

5

10

15

20

25

30

35

40

45

50

Source: Moody's Investors Service

0

5

10

15

20

25

30

35

40


Raising government revenue is among the new government's key priorities. The National Board of Revenue (NBR), in particular, hasset a target revenue to GDP ratio of 16% within three to four years and aims to achieve this by widening the tax base and improvingtax compliance. Measures to expand the tax base include organising annual, weeklong tax fairs to educate potential taxpayers andencourage tax registration and return filing, and modernising the value-added tax (VAT) system by moving it to a digital platform andharmonising and/or simplifying VAT rates. While the tax fairs have increased tax submissions in recent years and contributed to highergovernment revenue, the planned VAT law, which seeks to impose a uniform 15% tax rate on goods and services, faces persistentdelays because of opposition from business lobbies and requests for preferential rates from certain sectors. Implementation of the VATreform is now targeted for July 2019. Our forecasts include some, but not all, of the revenue increase planned by the government. Weexpect government revenue to increase modestly to 14.4% of GDP by fiscal 2020.

Low debt burden and debt structure underpin fiscal strength

Offsetting the fiscal constraints relating to weak government revenue is our expectation that Bangladesh’s debt burden will remainlow compared with peers (see Exhibit 21), given strong growth and moderate deficits. We expect general government debt to remainaround 30% of GDP over the next two years (see Exhibit 22), having declined from more than 45% of GDP as of the end of fiscal2005. Access to concessional loans from multilateral and bilateral sources, which account for around 40% of Bangladesh’s generalgovernment debt and more than 90% of total external debt, also mitigates debt affordability risks.

Exhibit 21

Bangladesh's government debt is low compared with peers...General government debt as % of GDP, 2019F

Exhibit 22

… and will remain low over the next few yearsGeneral government debt as % of GDP

0

20

40

60

80

100

120


0

5

10

15

20

25

30

35

40

45

Domestic debt External debt General government debt

Note: Fiscal years ending June.Source: Moody's Investors Service



Susceptibility to event risk: Moderate

Scale VL- VL VL+ L- L L+ M- M M+ H- H H+ VH- VH VH+

+ Final -


Median of countries with Ba3 ratingScore for BangladeshBangladesh Moderate

Susceptibility to event risk evaluates a country’s vulnerability to the risk that sudden events may severely strain public finances, thus increasing the

country’s probability of default. Such risks include political, government liquidity, banking sector and external vulnerability risks. Susceptibility of event

risk is a constraint which can only lower the preliminary rating range as given by combining the first three factors.



DEBT BURDENPOLITICAL RISK

GOVERNMENT LIQUIDITY RISK BANKING SECTOR RISK EXTERNAL VULNERABILITY RISK

Political riskGross borrowing

requirements/GDPNon-resident share

of gen. gov. debt (%)Market-implied rating

Average baselinecredit assessment

(BCA)Total domestic bank

assets/GDPBanking system

loan-to-deposit ratio

(Current accountbalance + FDIinflows)/GDP

External vulnerabilityindicator (EVI)

Net internationalinvestment

position/GDP

VERY HIGH

HIGH

MODERATE

LOW

VERY LOW

We assess Bangladesh’s susceptibility to event risk to be “Moderate”, driven by domestic political risk. The banking sector is also asource of vulnerability.

Political risk: Moderate

Our assessment of Bangladesh’s “Moderate” political risk reflects a high probability, low impact scenario involving protests by studentsand workers that threaten to slow daily activity that is already affected by traffic congestion and constrained by poor physicalinfrastructure. While these protests are generally small in scale and limited in duration, they also raise perceptions of risk in the country,which deter foreign investment. We further attach a moderate probability to large scale, politically motivated demonstrations thatwould have a moderate, disruptive impact on the broader economy.

Exhibit 23

Bangladesh Nigeria Kenya Thailand Tajikistan Cambodia Sri Lanka

Ba3/STA B2/STA B2/STA Baa1/STA B3/NEG B2/STA B2/STA

Final score M M M M M M M+

Geopolitical risk VL -- VL VL VL L- M VL

Domestic political risk M -- M M M M M- M+

Peer comparison table factor 4a: Political risk


The general election held at the end of December 2018 saw the incumbent ruling party, the Awami League (AL), remain in power witha strong majority, winning 77% of the vote and 257 seats out of 300 in parliament. The Bangladesh Nationalist Party, the country’smain opposition party which boycotted the previous election in 2014, contested the polls but won just 12% of the vote and 6 seats.Similar to 2014, there was violence in the lead up to and on Election Day, which resulted in dozens of fatalities, although the scale ofthe clashes was significantly smaller in 2018. The opposition also claimed vote rigging and demanded fresh elections, but there hasbeen no large-scale protests since the election.



Returning Prime Minister Sheikh Hasina has swiftly appointed a new cabinet with 31 first-time ministers, including the Ministerof Planning and the Minister of Commerce. Key aspects of the government’s policy agenda include raising the quality of physicalinfrastructure, expanding its revenue base and cleaning up the banking system.

Geopolitical risk in Bangladesh is very low. Events of terrorism have so far been infrequent and isolated. That said, should theirfrequency and intensity rise, they would have a material negative impact on the economy.

We also expect limited political implications from the influx of Rohingya refugees since August 2017 – which totaled more than730,000 as of January 2019 according to UNICEF – despite persistent delays to the November 2017 deal with Myanmar for the safereturn of the refugees to Myanmar’s Rakhine State. Beyond the immediate humanitarian issues, the Rohingya crisis has not stokeddomestic political dissent. Bangladesh also receives financial and humanitarian support from the United Nations, the World Bank(IBRD, Aaa stable) and other international and bilateral partners and nongovernmental organisations. However, long-term settlementor resettlement of the refugees in Bangladesh could pose challenges ranging from social integration and law and order, to food security.

Government liquidity risk: Low (-)

We have set Bangladesh’s score for government liquidity risk at “Low (-)”, above the indicative score of “Very Low (-)”, to reflect ourassessment that, in the event of liquidity pressure, market funding of government debt could come at significantly higher costs. In theabsence of a market-implied rating, these potential liquidity strains are not captured in the scorecard metrics.

Exhibit 24

Bangladesh L- Median Costa Rica Indonesia Colombia India Paraguay Guatemala

Ba3/STA B1/NEG Baa2/STA Baa2/NEG Baa2/STA Ba1/STA Ba1/STA

Final score L- M+ L- L- VL+ VL+ VL+

Indicative score VL- L VL VL VL+ VL+ L-

Gross borrowing req./GDP 4.8 5.6 12.7 4.7 3.7 10.5 1.8 2.1

Gen. gov. ext. debt/gen. gov. debt 38.7 38.7 21.0 61.2 52.9 5.5 81.0 45.1

Market funding stress indicator -- Baa2 B1 Baa2 Baa2 Baa3 Ba1 Ba2

Peer comparison table factor 4b: Government liquidity risk


Moderate fiscal deficits capped by the government at 5% of GDP, as well as generally long tenors and concessional terms associatedwith external borrowing, limit the government’s gross financing needs (see Exhibit 25). Bangladesh’s gross borrowing requirement was4.8% of GDP in fiscal 2018 and we do not expect any significant change over the next few years.

Exhibit 25

Bangladesh's gross borrowing requirements are low compared with peersGross borrowing requirement as % of GDP, 2019F

0

2

4

6

8

10

12

14

16

Azerbaijan Bangladesh Senegal Turkey Georgia Fiji Ba median Trinidad &Tobago

Vietnam Serbia Oman Croatia Morocco



https://www.moodys.com/credit-ratings/IBRD-World-Bank-credit-rating-410525

https://www.moodys.com/credit-ratings/IBRD-World-Bank-credit-rating-410525


Exposure to global financial market volatility is low because of very limited foreign participation in domestic capital markets andbecause the government does not have any outstanding external commercial bond. However, domestic capital markets are shallowand could propagate liquidity shocks. The increase in domestic borrowing from NSCs in recent years – which has occurred at theexpense of domestic bonds – has the potential to reduce trading liquidity in the domestic bond market and constrain its development.

Banking sector risk: Moderate (-)

We have set Bangladesh’s score for banking sector risk at “Moderate (-)”, above the indicative score of “Low (+)”, to reflect thecontingent liability risk posed by state-owned banks, which exhibit weaker asset quality, profitability and capital adequacy than areconveyed in the scorecard metrics. Weaknesses in the state-owned banks could also affect lending to the real economy as excessbanking system liquidity is concentrated in this sector, and raise perceptions of economic risks in the country.

Exhibit 26

Bangladesh M- Median Sri Lanka Serbia India Azerbaijan Bahrain Kazakhstan

Ba3/STA B2/STA Ba3/STA Baa2/STA Ba2/STA B2/STA Baa3/STA

Final score M- M- M- M- M M+ M

Indicative score L+ M- L L+ VL M+ VL

Baseline credit assessment b1 ba2 b2 -- ba2 caa1 b2 b1

Total dom. bank assets/GDP 66.1 77.8 77.3 75.7 83.9 39.7 235.6 45.5

Loan-to-deposit ratio 78.9 89.5 86.9 87.0 75.7 57.1 52.8 77.6

Peer comparison table factor 4c: Banking sector risk


Bangladesh's state-owned banks have significantly weaker asset quality, profitability and capital adequacy than private commercialbanks. Gross nonperforming loans (NPLs) of state-owned banks amounted to 31.2% of total loans in the third quarter of 2018,compared with 6.7% for private commercial banks, and have been rising since 2015 (see Exhibit 27).

Asset quality in the banking system has worsened as a result of the persistent weaknesses in the banks’ corporate governance and thedifficult process to resolve and recover bad loans. Both private commercial banks and state-owned banks, to a higher degree, are oftenimplicated in loan scandals. In addition, the stock of NPLs has accumulated partly because loan recovery remains difficult and lengthybecause of overburdened courts and repetitive writ petitions, among other issues.

Capital levels of the state-owned banks are also significantly lower at 6.1% of risk-weighted assets, compared with 12.2% for privatecommercial banks (see Exhibit 28). We believe the capital adequacy ratios of state-owned banks are likely to be even lower if notfor the regulatory forbearance on loan provisions. Four of the six state-owned banks do not currently meet minimum regulatoryrequirements for capital.

Exhibit 27

NPL ratios at state-owned banks continue to increaseGross NPLs as % of total loans

Exhibit 28

… while capital adequacy ratios have fallen to very low levels(Total capital as % of risk-weighted assets)

0%

5%

10%

15%

20%

25%

30%

35%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Q3

State-owned banks Private commercial banks

Sources: Bangladesh Bank and Moody's Investors Service

0%

2%

4%

6%

8%

10%

12%

14%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Q3


Sources: Bangladesh Bank and Moody's Investors Service



That said, state-owned banks are supported by ample deposit funding because of large amounts of retail and state-owned enterprisedeposits (see Exhibit 29), which reduces the risk of bank runs or liquidity crises resulting in bank failures. This limits financial stabilityrisks to the banking system and contingent liability risks to the sovereign. The market share of state-owned banks has also declined toless than 30% of total banking system assets and 20% of total banking system loans (see Exhibit 30).

Exhibit 29

The market share of state-owned banks has declined to less than30% of total banking system assets

Exhibit 30

… while the state-owned banks have ample liquidityLoan/deposit ratio, %

29% 27%21% 18%

6%3%

7%3%

7%4% 5%

4%

59%66% 67%

75%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2012 3Q2018 2012 3Q2018

Asset Share (%) Advances Share (%)

State-owned Banks Specialised Banks Foreign Banks Private Banks


40%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Q3



Nevertheless, perceptions of risk, driven by uncertainty over the scale of the asset quality problems and extent of undercapitalisation ofbanks, would deter foreign investment into the economy. Lingering asset quality issues and concerns over provisioning costs could alsocurb the credit risk appetite of banks in general, which would undermine financial inclusion and lending to entrepreneurs.

External vulnerability risk: Very Low (+)

We assess Bangladesh’s external vulnerability risk to be “Very Low (+)” given ample foreign-exchange reserve buffers that cover aboutfive to six months of total imports and more than 90% of gross external debt. The score is set above the indicative score of “Very Low(-)” to reflect the recent deterioration in the current account balance, which we expect will remain in deficit because of the ongoingimplementation of large infrastructure projects.

Exhibit 31

Bangladesh VL+ Median Bolivia Tanzania Senegal India FijiCote d

IvoireBa3/STA Ba3/STA B1/NEG Ba3/STA Baa2/STA Ba3/STA Ba3/STA

Final score VL+ VL+ VL+ VL+ L- VL VL

Indicative score VL- VL+ L- VL+ L- VL+ VL

(Curr. acc. bal. + FDI inflows)/GDP 0.5 2.9 -4.4 -0.6 -5.1 -0.4 -0.5 -1.0

External vulnerability indicator (EVI) 46.6 51.0 26.6 51.4 17.9 65.2 17.0 17.9

Peer comparison table factor 4d: External vulnerability risk


Bangladesh’s current account deficit narrowed over the first 6 months of fiscal 2019 compared with the corresponding period infiscal 2018, as an improved harvest and lower oil prices in recent months reduced the import bill for food and energy, respectively.Meanwhile, exports including RMG products have continued to grow steadily. As such, we expect the current account deficit to narrowto an average of around 2.0% of GDP over fiscal 2019 and 2020, after recording a deficit of 3.6% in fiscal 2018 (see Exhibit 32). Thatsaid, we continue to expect Bangladesh’s current account to remain in deficit because the government’s large infrastructure projects –particularly power and rail projects – are generally import intensive.



Exhibit 32

Bangladesh's current account deficit widened in fiscal 2018 on higher goods imports

-4

-3

-2

-1

0

1

2

3

4

5

6

-80

-60

-40

-20

0

20

40

60

80

100

120

2012 2013 2014 2015 2016 2017 2018

%$

Bill

ion

s

Current account: exports Readymade garments exports Other goods exports

Goods Imports Service exports Service imports

Primary income credit Primary income debit Secondary income credit

Current account balance % GDP (rhs)

Note: Fiscal years ending June.Sources: Bangladesh Bank, Moody's Investors Service

Despite the slight deterioration in the external account compared with pre-2017 years, Bangladesh’s foreign-exchange reserves remainadequate and the long maturity profile of external debt – mainly incurred by the public sector – mitigates external refinancing risk.Foreign-exchange reserve adequacy in Bangladesh is relatively high compared with peers: reserves amounted to $30 billion as of theend of 2018, sufficient to cover around six months of imports and 18 times external debt servicing costs over the next two years (seeExhibit 33). Foreign direct investment, which we estimate will amount to around 1% of GDP in fiscal 2019, will also contribute to thefinancing of the current account deficit.

Meanwhile, we also expect Bangladesh's External Vulnerability Indicator – the ratio of long-term and short-term external debtrepayments over the next year, including nonresident deposits, to foreign-exchange reserves – to remain low compared with similarlyrated peers, with an average reading of around 50% over the next two years (see Exhibit 34).

Exhibit 33

Foreign-exchange reserves coverage of imports remain adequateExhibit 34

… while the coverage of external payments due is also ample andlower than peersExternal Vulnerability Indicator, %

0

1

2

3

4

5

6

7

8

0

5

10

15

20

25

30

35Foreign exchange reserves (US$ billions)

No. months of imports (rhs)


0 20 40 60 80 100 120 140 160 180 200

Fiji

Senegal

Cote d Ivoire

Trinidad & Tobago

Guatemala

Bolivia

Vietnam

Bangladesh

Brazil

Ba median

Croatia

Serbia

Morocco

Namibia

Dominican Republic

Paraguay

Georgia

Azerbaijan

Turkey




Rating rangeCombining the scores for individual factors provides an indicative rating range. While the information used to determine the grid mapping is mainly historical, our ratings incorporateexpectations around future metrics and risk developments that may differ from the ones implied by the rating range. Thus, the rating process is deliberative and not mechanical,meaning that it depends on peer comparisons and should leave room for exceptional risk factors to be taken into account that may result in an assigned rating outside the indicativerating range. For more information please see our Sovereign Bond Rating methodology.

Exhibit 35

Sovereign rating metrics: Bangladesh

VH+ VH VH- H+ H H- M+ M M- L+ L L- VL+ VL VL-

+ -


+ -


+ - VH+ VH VH- H+ H H- M+ M M- L+ L L- VL+ VL VL-

+ -


+ -

VL- VL VL+ L- L L+ M- M M+ H- H H+ VH- VH VH+

+ -

Ba1 - Ba3

Ba3

Economic strength

How strong is the economic structure?

How robust are the institutions and how predictable are the policies?

Sub-factors: institutional framework and effectiveness,

policy credibility and effectiveness

How does the debt burden compare with the government's resource mobilization capacity?

Assigned rating:

Institutional strength

Fiscal strength

Susceptibility to event risk

What is the risk of a direct and sudden threat to debt repayment?

Economic resiliency

Government financial strength

Sub-factors: growth dynamics, scale of the economy, wealth

Sub-factors: debt burden, debt affordability

Sub-factors: political risk, government liquidity risk, banking sector risk, external vulnerability risk

Rating range:





ComparativesThis section compares credit relevant information regarding Bangladesh with other sovereigns that we rate. It focuses on a comparison with sovereigns within the same rating rangeand shows the relevant credit metrics and factor scores.

Bangladesh compares favorably to Ba3- and B1-rated sovereigns on economic size, potential growth and stability of growth, as well as the government's debt burden. Meanwhile,debt affordability and governance indicators are weaker than most peers. Susceptibility to event risk is driven by political risk, while banking sector risk is also elevated. Bangladesh'sexternal position is comparable with peers: its current account deficit is generally narrower but the ratio of maturing external debt obligations in relation to foreign reserves is slightlyhigher than the Ba3 median.

Exhibit 36

Bangladesh's key peers

Notes: [1] Moody's calculations. Percentiles based on our rated universe.Source: Moody's Investors Service



DATA, CHARTS AND REFERENCESChart pack: BangladeshExhibit 37

Economic growthExhibit 38

Investment and saving

0.0

0.2

0.4

0.6

0.8

1.0

1.2

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

Real GDP volatility, t-9 to t (ppts) (RHS)

Real GDP (% change) (LHS)


0

10

20

30

40

50

60

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

Gross investment/GDP Gross domestic saving/GDP


Exhibit 39

National incomeExhibit 40

Population

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

GDP per capita (US$) GDP per capita (PPP basis, US$)


0.90

0.95

1.00

1.05

1.10

1.15

1.20

140.0

145.0

150.0

155.0

160.0

165.0

170.0

175.02

009

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

Population (Mil.) (LHS) Population growth (% change) (RHS)


Exhibit 41

Global Competitiveness IndexRank [99] out of 137 countries

Exhibit 42

Inflation and inflation volatility

0 20 40 60 80 100 120

Senegal (Ba3/STA)

Dominican Republic (Ba3/STA)

Bangladesh (Ba3/STA)

Sri Lanka (Ba3/STA)

Vietnam (Ba3/STA)

Source: World Economic Forum

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

0.0

2.0

4.0

6.0

8.0

10.0

12.0

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

Inflation rate volatility, t-9 to t (ppts) (RHS)

Inflation rate (CPI, % change Dec/Dec) (LHS)




Exhibit 43

Institutional framework and effectivenessExhibit 44

Debt burden

-1.2

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

Government Effectiveness[1] Rule of Law[1] Control of Corruption[1]

Notes: [1] Composite index with values from about -2.50 to 2.50: higher values suggestgreater maturity and responsiveness of government institutions.Source: Worldwide Governance Indicators

0

50

100

150

200

250

300

350

400

450

0

5

10

15

20

25

30

35

40

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

Gen. gov. debt/GDP (%) (LHS)

Gen. gov. debt/gen. gov. revenue (%) (RHS)


Exhibit 45

Debt affordabilityExhibit 46

Financial balance

0.0

5.0

10.0

15.0

20.0

25.0

0.0

0.5

1.0

1.5

2.0

2.5

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

Gen. gov. interest payment/GDP (%) (LHS)

Gen. gov. interest payment/gen. gov. revenue (%) (RHS)


-6

-5

-4

-3

-2

-1

02

009

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

Gen. gov. financial balance/GDP (%)

Gen. gov. primary balance/GDP (%)


Exhibit 47

Government liquidity riskExhibit 48

External vulnerability risk

0

5

10

15

20

25

30

35

40

0

10

20

30

40

50

60

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

Gen. gov. debt/GDP (%) (RHS)

Gen. gov. external debt/total gen. gov. debt (%) (LHS)


0

10

20

30

40

50

60

0

20

40

60

80

100

120

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

20

19

F

20

20

F

External debt/CA receipts (%)(LHS)

External vulnerability indicator (%)(RHS)




Rating history

Exhibit 49

Bangladesh[1]

Outlook Action Date

Foreign

Currency

Local

Currency

Foreign

Currency

Local

Currency

Foreign

Currency

Local

Currency

Ba3 Ba3 STA - - NP NP Apr-10

Review Action Short Term RatingsLong Term Ratings

Notes: [1] Table excludes rating affirmations and ceilings. Please visit the issuer page for Bangladesh for the full rating history.Source: Moody's Investors Service


https://www.moodys.com/credit-ratings/Bangladesh-Government-of-credit-rating-806356877


Annual statistics

Exhibit 50

Bangladesh 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018F 2019F 2020F

Economic structure and performance

Nominal GDP (US$ bil.)[1] 102.5 115.3 128.7 133.4 150.0 172.9 195.1 221.4 249.7 274.0 302.1 335.4

Population (Mil.) 152.1 153.9 155.7 157.6 159.4 161.2 163.0 164.7 166.4 168.1 169.8 171.5

GDP per capita (US$)[1] 674 749 826 847 941 1,072 1,198 1,345 1,501 1,631 1,779 1,956

GDP per capita (PPP basis, US$) 2,442 2,592 2,785 2,981 3,177 3,407 3,641 3,905 4,230 -- -- --

Nominal GDP (% change, local currency)[1] 12.2 13.1 14.8 15.2 13.6 12.1 12.8 14.3 14.0 13.9 12.9 12.2

Real GDP (% change)[1] 5.0 5.6 6.5 6.5 6.0 6.1 6.6 7.1 7.3 7.9 7.5 7.0

Inflation (CPI, % change Dec/Dec)[1] 2.3 8.7 10.2 8.6 8.0 7.0 6.2 5.5 5.9 5.5 5.4 5.2

Gross investment/GDP[1] 26.2 26.2 27.4 28.3 28.4 28.6 28.9 29.7 30.5 31.2 32.6 32.9

Gross domestic saving/GDP[1] 20.3 20.8 20.6 21.2 22.0 22.1 22.2 25.0 25.3 22.8 21.6 19.3

Nominal exports of G & S (% change, US$ basis)[1] 7.3 6.4 38.8 4.9 9.0 12.0 3.1 9.0 1.9 8.0 7.4 5.9

Nominal imports of G & S (% change, US$ basis)[1] 3.7 5.8 40.9 5.4 7.6 9.9 9.5 -2.3 7.3 26.9 19.1 16.8

Openness of the economy[2] 40.1 37.8 47.4 48.1 46.3 44.5 42.1 38.0 35.3 38.2 39.8 40.4

Government Effectiveness[3] -0.8 -0.7 -0.8 -0.8 -0.8 -0.8 -0.7 -0.7 -0.7 -- -- --

Government finance

Gen. gov. revenue/GDP[1] 9.4 9.9 10.4 11.2 11.3 10.9 9.8 10.1 10.2 11.7 11.7 12.8

Gen. gov. expenditures/GDP[1] 12.5 12.7 14.0 14.4 14.5 14.0 13.5 13.8 13.6 16.5 16.1 16.5

Gen. gov. financial balance/GDP[1] -3.1 -2.8 -3.6 -3.2 -3.3 -3.1 -3.7 -3.7 -3.4 -4.8 -4.3 -3.7

Gen. gov. primary balance/GDP[1] -1.2 -1.0 -1.9 -1.3 -1.3 -1.0 -1.7 -1.8 -1.6 -3.1 -2.5 -1.8

Gen. gov. debt (US$ bil.)[1] 36.7 37.1 40.0 41.0 46.9 51.2 54.0 61.2 66.2 75.0 87.4 98.8

Gen. gov. debt/GDP[1] 35.9 32.3 32.4 31.8 30.4 29.6 27.7 27.7 27.0 27.9 29.1 29.6

Gen. gov. debt/gen. gov. revenue[1] 382.2 325.6 312.2 283.7 270.0 271.1 283.1 274.5 264.2 237.9 247.6 232.1

Gen. gov. interest payments/gen. gov. revenue[1] 20.1 18.8 16.4 17.2 17.7 19.2 20.9 18.9 17.6 14.4 15.7 14.9

Gen. gov. FC & FC-indexed debt/gen. gov. debt[1] 56.8 54.5 53.1 52.2 49.0 47.6 44.0 43.0 41.9 43.4 42.4 41.7

External payments and debt

Nominal exchange rate (local currency per US$, Dec)[1] 69.1 69.5 74.2 81.8 77.8 77.6 77.8 78.4 80.6 83.7 84.5 85.5

Real eff. exchange rate (% change) -- -- -- -- -- -- -- -- -- -- -- --

Current account balance (US$ bil.)[1][4] 2.4 3.7 -1.7 -0.4 2.4 1.4 2.9 4.3 -1.3 -9.8 -6.2 -6.3

Current account balance/GDP[1][4] 2.4 3.2 -1.3 -0.3 1.6 0.8 1.5 1.9 -0.5 -3.6 -2.0 -1.9

External debt (US$ bil.)[1] -- -- -- 24.5 29.3 34.0 37.3 40.8 45.2 55.0 58.9 62.9

Public external debt/total external debt[1] -- -- -- 93.2 85.5 82.4 73.3 73.6 76.7 74.6 77.4 77.4

Short-term external debt/total external debt[1] -- -- -- 6.1 8.6 11.6 17.8 17.1 20.0 22.2 21.6 21.6

External debt/GDP[1] -- -- -- 18.4 19.5 19.6 19.1 18.4 18.1 20.1 19.5 18.7

External debt/CA receipts[5][1] -- -- -- 60.9 65.9 70.8 74.9 77.9 88.7 97.7 94.0 89.3



2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018F 2019F 2020F

External payments and debt

Interest paid on external debt (US$ bil.)[1][6] 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.3 0.3 0.4 0.3 0.3

Amortization paid on external debt (US$ bil.)[1][7] 1.5 1.5 1.6 2.5 3.5 2.7 2.3 2.1 1.7 2.0 2.1 2.3

Net foreign direct investment/GDP[1] 1.1 0.9 0.6 0.9 1.2 1.3 1.5 0.9 1.0 0.8 0.8 0.9

Net international investment position/GDP -21.1 -16.5 -15.3 -15.2 -13.9 -11.2 -10.8 -8.6 -7.3 -- -- --

Official forex reserves (US$ bil.)[1] 7.4 10.0 9.2 9.0 13.9 19.8 23.6 28.2 31.6 30.9 30.0 30.0

Net foreign assets of domestic banks (US$ bil.) -0.2 -0.3 0.2 0.1 0.7 0.5 -0.6 -0.7 -2.0 -- -- --

Monetary, external vulnerability and liquidity indicators

M2 (% change Dec/Dec)[1] 19.2 22.4 21.3 17.4 16.7 16.1 12.4 16.3 10.9 -- -- --

Monetary policy rate (% per annum, Dec 31)[1] 8.5 4.5 6.8 7.8 7.3 7.3 7.3 6.8 6.8 -- -- --

Domestic credit (% change Dec/Dec)[1] 16.0 17.9 27.4 19.6 10.3 11.6 10.0 14.2 11.2 -- -- --

Domestic credit/GDP[1] 40.9 42.7 47.3 49.1 47.7 47.5 46.3 46.2 45.1 -- -- --

M2/official forex reserves (X)[1] 5.8 5.3 6.5 7.0 5.6 4.5 4.3 4.1 4.0 -- -- --

Total external debt/official forex reserves[1] -- -- -- 272.7 210.2 171.1 158.1 144.6 143.2 178.4 196.3 209.5

Debt service ratio[8][1] 6.4 5.7 5.0 6.9 8.5 6.3 5.1 4.5 3.9 4.2 3.9 3.7

External vulnerability indicator (EVI)[9][1][10] 25.1 20.3 16.2 27.7 55.8 37.8 31.3 37.0 30.8 35.0 46.6 50.1

Liquidity ratio[11][1] 52.4 39.1 58.5 79.5 105.4 88.7 77.9 58.1 53.6 -- -- --

Total liabilities due BIS banks/total assets held in BIS banks[1] 59.1 37.3 50.9 71.1 106.5 90.9 93.8 82.1 71.0 -- -- --

"Dollarization" ratio[12] 1.4 1.2 1.3 1.5 1.1 1.0 0.9 0.8 0.6 -- -- --

"Dollarization" vulnerability indicator[13] 6.8 5.1 6.8 8.3 5.1 3.8 3.2 2.8 2.1 -- -- --

[1] Fiscal years ending June 30, e.g. 2010 refers to fiscal year 2009/10

[2] Sum of Exports and Imports of Goods and Services/GDP

[3] Composite index with values from about -2.50 to 2.50: higher values suggest greater maturity and responsiveness of government institutions

[4] Import numbers based on payment settlements data, except FY11 which used customs data

[5] Current Account Receipts

[6] Public sector interest payments

[7] Public sector principal repayments

[8] (Interest + Current-Year Repayment of Principal)/Current Account Receipts

[9] (Short-Term External Debt + Currently Maturing Long-Term External Debt + Total Nonresident Deposits Over One Year)/Official Foreign Exchange Reserves

[10] Excludes total nonresident deposits

[11] Liabilities to BIS Banks Falling Due Within One Year/Total Assets Held in BIS Banks

[12] Total Foreign Currency Deposits in the Domestic Banking System/Total Deposits in the Domestic Banking System

[13] Total Foreign Currency Deposits in the Domestic Banking System/(Official Foreign Exchange Reserves + Foreign Assets of Domestic Banks)




Moody's related publications

» Rating Action: Moody's affirms Bangladesh's Ba3 rating, maintains stable outlook, 10 October 2018

» Credit Opinion: Government of Bangladesh – Ba3 Stable: Update following rating affirmation of Ba3, outlook unchanged, 11October 2018

» Sector In-Depth: Moody's: Frontier market governments with maturing international bonds face refinancing risks amid tighteningfunding conditions, 10 October 2018

» Country Statistics: Bangladesh, Government of, 28 November 2018

» Outlook: Sovereigns – Asia Pacific: 2019 outlook stable as domestic strengths counter rising external, policy uncertainties, 10January 2019

» Rating Methodology: Sovereign Bond Ratings, 27 November 2018

To access any of these reports, click on the entry above. Note that these references are current as of the date of publication of this report and that more recent reports may be available. Allresearch may not be available to all clients.

Related websites and information sources

» Sovereign risk group web page

» Sovereign ratings list

MOODY’S has provided links or references to third party World Wide Websites or URLs (“Links or References”) solely for your convenience in locating related information and services.The websites reached through these Links or References have not necessarily been reviewed by MOODY’S, and are maintained by a third party over which MOODY’S exercises no control.Accordingly, MOODY’S expressly disclaims any responsibility or liability for the content, the accuracy of the information, and/or quality of products or services provided by or advertised onany third party web site accessed via a Link or Reference. Moreover, a Link or Reference does not imply an endorsement of any third party, any website, or the products or services providedby any third party.

AuthorsChristian FangAVP-Analyst

Allister LimAssociate Analyst


https://www.moodys.com/research/Moodys-affirms-Bangladeshs-Ba3-rating-maintains-stable-outlook--PR_389357

https://www.moodys.com/research/Government-of-Bangladesh-Ba3-Stable-Update-following-rating-affirmation-of-Credit-Opinion--PBC_1145110

https://www.moodys.com/research/Moodys-Frontier-market-governments-with-maturing-international-bonds-face-refinancing--PR_390011

https://www.moodys.com/research/Moodys-Frontier-market-governments-with-maturing-international-bonds-face-refinancing--PR_390011

https://www.moodys.com/credit-ratings/Bangladesh-Government-of-credit-rating-806356877/financials/sov



https://www.moodys.com/researchandratings/market-segment/sovereign-supranational/-/005005/005005/-/-1/0/-/0/-/-/en/global/rr

https://www.moodys.com/research/Sovereign-Supranational-Rating-List--PBC_186519


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