Moody’s raised Bangladesh’s sovereign credit outlook to ‘stable’ from ‘negative’ on Tuesday, citing easing political uncertainty, stronger foreign exchange reserves and record remittances, while leaving the country’s sovereign credit rating unchanged at ‘B2’.
The agency also kept Bangladesh’s long-term issuer and senior unsecured rating at ‘B2’ and its short-term issuer rating at ‘Not Prime’. It said the risks that had previously prompted the negative outlook were now balanced at levels consistent with the ‘B2’ rating.
Moody’s had held the outlook at ‘negative’ since November 2024, when it lowered it from ‘stable’.
The agency said political uncertainty had eased since February’s election, creating conditions for the new government to pursue reforms on a strong popular mandate. A stronger reserve position, a relatively flexible exchange rate and record remittances have bolstered Bangladesh’s external position, helping it absorb higher energy import costs.
Reserves stood at about $32.9 billion by mid-2026, enough to cover more than four months of imports, up from about $21.4 billion at the end of 2024, Moody’s said. It attributed the gain to record remittances through formal banking channels, the more flexible exchange rate and the removal of earlier market distortions.
Moody’s expects growth to recover gradually. Real GDP growth, which fell to 3.5 percent in the 2024–25 fiscal year, rose to 4.1 percent in 2025–26 and could reach 4.3 percent in 2026–27. From FY 2027–28, growth could approach 4.9 percent as investment and industrial activity normalise. Inflation, however, remains a major concern and is expected to stay close to 9 percent before easing gradually.
The agency cited Bangladesh’s continued engagement with the IMF and other international financial institutions as an important support for external financing, economic stability and structural reform, noting that talks on conditions for a follow-on IMF programme are still underway.
Despite the improved outlook, Moody’s left the ‘B2’ sovereign credit rating unchanged, pointing to the banking sector as one of the main weaknesses. Non-performing loans have climbed to about 32.8 percent following reforms to the sector, and restoring banks’ regulatory capital adequacy could require recapitalisation equivalent to roughly 10 percent of GDP.
That burden could strain government finances, given limited revenue capacity and growing reliance on domestic banks for funding, the agency said. It also flagged Bangladesh’s narrow revenue base and weak debt-servicing capacity as significant weaknesses.
Bank liquidity, by contrast, remains stable, with deposits rising about 12 percent in the year to March 2026. Moody’s said this showed the sector’s main problem is capital and solvency rather than liquidity.
Moody’s identified energy supply constraints as a key risk to growth. A recent disruption at an LNG import terminal highlighted weaknesses in the country’s energy system, hitting power generation, industry and fertiliser production.
Graduation from least-developed country status could also bring new pressures, the agency warned, putting pressure on export competitiveness and access to low-cost concessional financing.
Ready-made garments will remain central to exports, but Moody’s said sustained structural reform is needed to unlock longer-term growth.
Faster-than-expected progress in tackling banking weaknesses, higher revenue collection and stronger institutional capacity and policy effectiveness could support an upgrade, Moody’s said. A large-scale transfer of bank liabilities to the government, weaker growth or revenue, reduced access to external financing, or renewed political instability could weigh on the rating.
Bangladesh Bank welcomed the assessment, the central bank said in a statement signed by assistant spokesperson Saeda Khanam. It said the central bank was committed to sustaining macroeconomic stability and reform, and that the ‘stable’ outlook would play an important role in building international investor confidence and improving the country’s sovereign credit rating.