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The US-based Moody’s Ratings has revised its outlook on Bangladesh to stable from negative, citing easing political and external pressures, stronger foreign exchange reserves and record remittance inflows.
In its latest report released on Tuesday, the global ratings agency said the shift in outlook to stable from negative reflects easing political and external pressures, which have balanced risks at the B2 rating level despite persistent structural vulnerabilities.
The agency also said Bangladesh’s B2 rating reflects its long-term growth potential, supported by favorable demographics, a diversified economy and a competitive RMG sector, balanced against a narrow revenue base, weak debt affordability and banking-sector weaknesses posing contingent liability risks.
The post-election transition and strong governing mandate have reduced political risks to reform, while stronger reserves, a more flexible exchange rate and record remittances have improved Bangladesh’s external position and cushioned higher energy import costs, according to the assessment report.
The agency said Bangladesh’s foreign exchange reserves rose to around US$32.9 billion by mid-2026, covering over four months of imports, from $21.4 billion at end-2024, supported by record remittances, a more flexible exchange rate regime and the removal of market distortions.
Moody’s Ratings expects Bangladesh’s GDP growth to rise to 4.3 per cent in FY2026-27, as improving confidence and investment are offset by the energy shock, high inflation and supply disruptions. Growth is projected to recover gradually to around 4.9 per cent from FY2028 as investment and industrial activity normalize. GDP growth rose to 4.1 per cent in FY2026 from 3.5 per cent a year earlier, supported by reduced political uncertainty following the February 2026 election.
The agency also projects inflationary pressure in Bangladesh to remain around 9.0 per cent before easing gradually.
“Despite higher import costs, gas supply volatility, and challenges to the RMG sector, the economy has shown underlying resilience,” the agency said, adding that record remittances underpin relatively firm private consumption and the RMG sector continues to anchor exports despite higher costs.
Moody’s estimates that Bangladesh’s banks need recapitalization equivalent to around 10 per cent of GDP to meet regulatory capital requirements. The process will need to be phased over several years, placing a significant burden on limited fiscal space and increasing reliance on domestic bank financing, which could crowd out private-sector credit.
The agency noted that authorities have advanced banking-sector reforms, including asset quality reviews, deposit protection legislation, an IMF-backed resolution strategy and the repeal of a provision allowing former owners of failed banks to reacquire ownership.
It also said banking-sector liquidity remains stable, with deposits growing around 12 per cent year-on-year to March 2026, indicating that weaknesses are primarily related to solvency rather than liquidity.
Fiscal strength, however, remains constrained by one of the narrowest revenue bases among rated sovereigns, with interest payments absorbing nearly 30 per cent of government revenue despite public debt remaining moderate at around 40 per cent of GDP.
“We expect debt to rise gradually over the medium term, reflecting persistent primary deficits and prospective banking-sector support costs, although continued access to concessional financing from multilateral and bilateral creditors helps contain borrowing costs and mitigates refinancing risks,” Moody’s ratings noted.
Earlier, in July this year, S&P Global revised Bangladesh’s long-term outlook to negative from stable, citing persistent banking-sector weaknesses and risks from volatile global energy markets and trade conditions.
In May 2026, Fitch Ratings also revised Bangladesh’s outlook to negative from stable, citing heightened macroeconomic vulnerabilities.
