S&p affirmed Bangladesh Ratings

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5/22/2017

S&P rates BD ‘stable’

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Yesterday at 9:58 AM

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Global rating agency Standard & Poor's (S&P) affirmed its 'BB­ ' long­term and 'B' short­term sovereign credit ratings on Bangladesh with a stable outlook for the consecutive eighth year, notwithstanding some drawbacks.

Comillaboy

The stable outlook balances the country's healthy growth

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prospects and an improving external profile against fiscal

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weaknesses and development needs, according to the S&P research update, released on May 19. "Although we assess Bangladesh's external debt as low, the country faces the vulnerabilities of a low­income economy, fiscal constraints, and heavy development needs," it noted. The rating agency also see moderate risk of contingent liabilities from financial institutions, in particular the state­ owned commercial banks (SoCBs) sector. Although the private­sector banks are in adequate shape, S&P finds significant risks residing in the SoCBs.

The SoCBs account for 28 per cent of total banking­sector assets and non­performing loans (NPLs) and had reached 25 per cent of its total loans as of end 2016. https://defence.pk/pdf/threads/s­p­rates­bd­stable.496889/

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S&P rates BD ‘stable’

"Although the government has begun to recapitalize some of the SoCBs, we expect the sector to remain below prudential norms and will continue to require budgetary support," the rating agency observed about the downside. It also said the central bank's limited independence, multiple mandates, and underdeveloped capital markets hamper monetary flexibility. After the cyber­heist of US$100 million in foreign reserves from Bangladesh Bank last year, the Ministry of Finance has since asserted more control over the central bank, the rating agency explained. "The central bank has made progress in managing inflationary expectations. In the past two years, inflationary pressure had subsided with reduced government borrowing from the banking sector," it added. Inflation has stayed in the single digits since 2011. About exchange rate, the S&P said the Bangladeshi Taka exchange rate remained fairly stable in the past two to three years. "However, Bangladesh's real effective exchange rate has been rising, reflecting the currency depreciation of its trading partners. Should this persist, it could strain the competiveness of its export garment sector," the rating agency predicts. The S&P envisages remittance inflows to remain subdued over the next one to two years, but a drastic collapse is not within its base­case scenario. Bangladesh's narrow revenue base limits the government's flexibility to mitigate the effect of economic downturns or other shocks. It has only 2.0 million registered taxpayers (out of a

population of 155 million), according to the S&P. It also said general government revenue was 10 per cent of https://defence.pk/pdf/threads/s­p­rates­bd­stable.496889/

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GDP (gross domestic product) in fiscal 2016, among the lowest of rated sovereigns globally. "Numerous initiatives are underway to expand the tax base, most notably the plan to reform the complicated Value Added Tax (VAT) system," it noted. The government has set a target to standardise the VAT rate at 15 per cent by July 2017. However, the plan has been repeatedly delayed over the past years since it was first passed into law in 2012. On the fiscal front, Bangladesh tends to run moderate deficits. The S&P forecasts the change in general government debt will average 2.8 per cent of GDP annually over fiscal 2017­2020 (end June 30). However, many basic social and infrastructure needs remain unmet, implying the need for higher outlays ahead. "Although the government's debt burden is low, with net general government debt at our projection of 22 per cent of GDP as of the end of fiscal 2017, its high interest expense at 17.4 per cent of revenues limits fiscal flexibility," it noted. The S&P also said the government's increasing use of a costlier national savings­certificate scheme rather than commercial borrowings infers that its debt­servicing ratio will not necessarily fall even if there is fiscal consolidation. Despite numerous structural impediments to growth, in particular the shortage of electricity, the agency has found the economy recording a steady growth. "Should these impediments be addressed, we believe Bangladesh's growth trajectory would be stronger than peers'. That said, the high dividend payouts in comparison to foreign direct investments suggest little earnings are retained due to  the difficult business­operating environment," the rating agency said. https://defence.pk/pdf/threads/s­p­rates­bd­stable.496889/

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http://www.thefinancialexpress­ bd.com/2017/05/20/70933/S&P­rates­BD­‘stable’ Thanks x 1

Yesterday at 10:09 AM

#2

Meh....we need to improve our credit rating to BB+ soon.

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Yesterday at 10:23 AM

#3 Comillaboy said: ↑ 'BB­' long­term and 'B' short­term sovereign credit ratings

These are junk bond ratings. BD can do a lot better.

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https://defence.pk/pdf/threads/s­p­rates­bd­stable.496889/

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Yesterday at 11:47 AM

#4

Only 2 millions of registered tax payers? LOL, ordinary peoples are corrupt in Bangladesh but, they like to blame government for corruption! WTF...

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Yesterday at 12:29 PM

#5 OrdinaryGenius said: ↑ Only 2 millions of registered tax payers? LOL, ordinary peoples are corrupt in Bangladesh but, they like to blame government for corruption! WTF...

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Today at 3:03 AM

#6 OrdinaryGenius said: ↑  Only 2 millions of registered tax payers? LOL, ordinary peoples are corrupt in Bangladesh but, they like to blame government for corruption! WTF...

Nilgiri https://defence.pk/pdf/threads/s­p­rates­bd­stable.496889/

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Within next 10 years or so, BD can try something along lines of demonetisation effort done in India (incorporate the good, try to mitigate the bad...now that its been done once).

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The real long term silver lining for that was it brought in about

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9 million "new" taxpayers into the base...and further accounts are now under deep scrutiny for money laundering etc. http://www.livemint.com/Politics/WR...tisation­ effect­91­million­new­taxpayers.html BD can put it off for some more time though since your credit/GDP ratio can still increase organically for some time in current situation (its not very hot money­based yet like India became over last 5 or so years)...sweet spot for such move is best left for BD economists to find. I would say get to investment grade credit rating first and check the long term monetary equilibrium at that point. Thanks x 3

Today at 8:45 AM

#7 Nilgiri said: ↑ Within next 10 years or so, BD can try something along lines of demonetisation effort done in India (incorporate the good, try to mitigate the bad...now that its been done once).

OrdinaryGenius

The real long term silver lining for that was it brought in about 9

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million "new" taxpayers into the base...and further accounts are now under deep scrutiny for money laundering etc.

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Bhaijan, neither Economics is my subject of interest nor do I understand it well (minus the basics).

BTW, let's wait and see what BDs economists can do for the country.  Thanks x 1

https://defence.pk/pdf/threads/s­p­rates­bd­stable.496889/

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Today at 3:22 PM

#8 Comillaboy said: ↑ The government has set a target to standardise the VAT rate at 15 per cent by July 2017.

bluesky

I think, a 15% VAT in BD is too high. It should be fixed near

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5% and increased step by step. BD is trying to follow the examples of probably the european countries without thinking that those countries too a few centuries before had no VAT

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system. Also, the citizens there get many facilities by deed of their paying VAT today. So, what benefit BD people will get by paying 15% VAT? Nothing. The revenue shortfall must better be filled up from corporate and individual income taxes. The more a a company earns, the more it pays taxes. The more an individual person earns, the higher becomes his/her tax bracket. Every wage earner must also pay income taxes, whatever may be his income. BD has almost no effective system of assessing and collecting income taxes.

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S&P rates BD ‘stable’

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