Moody’s Ratings has revised Bangladesh’s sovereign credit outlook to “stable” from “negative”, citing reduced political uncertainty, easing external pressures, stronger foreign exchange reserves and record remittance inflows.
In its latest assessment released on Tuesday (September 15), the international ratings agency said the political transition following the election and broad public support for the new government had reduced the risk that political uncertainty could disrupt the reform process.
Continued commitments under the International Monetary Fund (IMF) programme and support from other development partners are also contributing to Bangladesh’s financing position, Moody’s said.
The agency, however, kept Bangladesh’s long-term issuer and senior unsecured ratings unchanged at “B2” and its short-term issuer rating at “Not Prime”. Moody’s had downgraded Bangladesh’s rating from B1 to B2 in March 2025 and changed the outlook to negative, citing risks related to asset quality, high inflation and weak economic growth.
Moody’s said Bangladesh’s foreign exchange reserves had risen to around $32.9 billion by mid-2026, supported by record remittance inflows through formal banking channels, a more flexible exchange rate and reforms aimed at making the exchange rate more market-driven. The reserves cover more than four months of imports, compared with $21.4 billion in 2024.
The agency expects economic growth to gradually recover. It estimated GDP growth at 3.5% in fiscal 2024-25 and 4.1% in FY2025-26, and projected growth of 4.3% in FY2026-27 and 4.9% in FY2027-28 if industrial activity and investment recover. Inflation, however, is expected to remain around 9%.
Moody’s identified weaknesses in the banking sector as a key constraint on Bangladesh’s sovereign rating. Non-performing loans have reached around 32.8% of total loans, while recapitalising banks to restore them to international standards could require funds equivalent to about 10% of GDP.
The agency said the banking sector’s main challenge was not liquidity but capital weakness caused by high levels of non-performing loans. Bank deposits had grown 12% year-on-year through March 2026.
Moody’s also highlighted Bangladesh’s low tax-to-GDP ratio and limited fiscal flexibility. Around 30% of government revenue is spent on interest payments, although public debt remains manageable relative to GDP.
Other risks include vulnerabilities in the power sector, highlighted by disruptions at LNG terminals that affected electricity and industrial production. Moody’s also noted potential challenges to export competitiveness and access to concessional financing as Bangladesh prepares to graduate from the least developed country (LDC) category.
