Moody's says pressure on Bangladesh rising but crisis risk low

[AmiEktaKharapChele]

Government said IMF loan request is for meeting future needs. Forex reserves down 13% in past 12 months to $39.67 billion​

The pressure on Bangladesh's economy is building, even though the nation's default risk is low, according to Moody's Investors Service.


"The main message is that although foreign-exchange reserves have dropped lately – this is from high levels, and the sovereign's external vulnerability indicator is low," said Camille Chautard, a sovereign analyst at Moody's in Singapore.

Bangladesh is seeking a loan from International Monetary Fund to reduce macro economic risks and create financial buffers as surging import costs drain its foreign reserves.


Authorities have announced power cuts and are cracking down on money hoarders amid a dollar shortage. The country's foreign currency reserves declined to $39.67 billion as of July 20 from $45.51 billion a year earlier.

The $416 billion economy was among the fastest-growing in the world for years until the war in Ukraine caused supply disruptions and soaring commodity prices added to Bangladesh's woes.



Bangladesh has sought the IMF loan to meet any future needs but it's not facing an economic crisis, Finance Minister AHM Mustafa Kamal said on Wednesday.

"We expected a deterioration in the current-account deficit due to lower remittances, lower demand for exports, and of course high fuel and food prices," Moody's Chautard said. "These pressures are indeed building and the situation has also deteriorated due to severe flooding recently."



Source

 

[UKBengali]

BD is doing all the right things to limit its risk of currency crisis.

If the IMF is offering good terms for the 4.5 billion US dollars, then BD would be stupid not to take it.


Good to hear that the rating agencies think BD is highly unlikely to get into severe difficulties.

 

[EasyNow]

I appreciate BD leadership for being realistic rather than doing things to keep up appearances.

Yes BD is doing better than ever, but we cant pretend to be untouchable. The world is in financial crisis, so the govt has tightened spending. Load shedding, curbs on unnecessary imports, taking extra loans as precaution are all excellent, sensible moves at this time.

 

[mb444]

There is no sugar coating the scenario.... global circumstances will test BD economic resilience.

BD should utilise cheap loans where feasible... one silver lining with the expected recession, a sovereign loan for BD with its credit history and economic outlook should attract a low rate of interest.

However BD at the same time must come down hard on hundi channels, reduce unnecessary imports, leverage BD diaspora and grant them savings opportunities in hard currency. Better still BoB should facilitate BDs borrow against savings from foreign banks and deposit the whole lot in BD banks.

Prescription for foreign currency pressures are many.... it is good that BD is well positioned to absorb them with a sizeable internal economy, self sufficiency in food, reasonable export volume in low elasticity goods and a large diaspora.

In sha allah we will be fine but must prepare for the worst and take early steps.

 

[Destranator]

There is no sugar coating the scenario.... global circumstances will test BD economic resilience.

BD should utilise cheap loans where feasible... one silver lining with the expected recession, a sovereign loan for BD with its credit history and economic outlook should attract a low rate of interest.

However BD at the same time must come down hard on hundi channels, reduce unnecessary imports, leverage BD diaspora and grant them savings opportunities in hard currency. Better still BoB should facilitate BDs borrow against savings from foreign banks and deposit the whole lot in BD banks.

Prescription for foreign currency pressures are many.... it is good that BD is well positioned to absorb them with a sizeable internal economy, self sufficiency in food, reasonable export volume in low elasticity goods and a large diaspora.

In sha allah we will be fine but must prepare for the worst and take early steps.

The govt must to do more to make investments by expatriates more convenient, securecand attractive. The amount of paperwork one has to go through to buy bonds is moronic to say the least.
Need to also relax forex rules to facilitate easy inward instant payments through platforms such as Paypal - this will boost exports.

Investment in production of new import substitutes must be heavily incentivised.

The time is also ripe to mechanise farming and set up cold storages across the country. We deserve to be a major food exporter.

 

[BananaRepublicUK]

BD is doing all the right things to limit its risk of currency crisis.

If the IMF is offering good terms for the 4.5 billion US dollars, then BD would be stupid not to take it.


Good to hear that the rating agencies think BD is highly unlikely to get into severe difficulties.

This isn’t going to go down well with the doom mongers.

They were also predicting doom during covid!

 

[Rushd Alam]

This isn’t going to go down well with the doom mongers.

They were also predicting doom during covid!

Sorry for being that but I cant see the light end of the tunnel yet. All the experts I follow and respect are quite pessimistic for short to mid term.

Unless you can share some positive news. I am usually an optimistic person but lately I am seeing only negetive.

 

[BananaRepublicUK]

Sorry for being that but I cant see the light end of the tunnel yet. All the experts I follow and respect are quite pessimistic for short to mid term.

Unless you can share some positive news. I am usually an optimistic person but lately I am seeing only negetive.

How many of these “experts” have a PhD from an elite university?

Any old hackster can spout nonsense on an YouTube channel.

YouTube has made everyone an “expert”!

 

[UKBengali]

Sorry for being that but I cant see the light end of the tunnel yet. All the experts I follow and respect are quite pessimistic for short to mid term.

Unless you can share some positive news. I am usually an optimistic person but lately I am seeing only negetive.

How many of these “experts” have a PhD from an elite university?

Any old hackster can spout nonsense on an YouTube channel.

YouTube has made everyone an “expert”!

Let us look at the data and what is happening in the near future.

Imports slow in June

Imports slowed down in June after the Bangladesh Bank tightened the rules for opening LCs (Letters of Credit) for luxury items as part of its efforts to shore up foreign exchange reserves. In June, LC settlements declined by over 6% month-on-month and the trend continued in July, according to...

www.tbsnews.net

BD now has similar foreign exchange coming in from exports + remittances than imports and so foreign reserves have stopped dropping and it has stabilised.


Now fuel costs to drive power plants are a significant foreign exchange drain. Roopur reactor 1 will come online in 2023 and Roopur reactor 2 will come online in 2024. Each one of these reactors will save around 700 million dollars in gas import costs in place of generating the electricity using a gas fired plant.

Going forward in 2026, 500MW of cheap hydroelectric power will come from Nepal via India and there are likely to be many GWs of this type of power supplied by the end of the decade.


BD will be just fine as it is one of the best run developing economies in the world and so not need to worry. Hasina has it all in hand.



Fun fact - BD produced more potatoes in 2021 than France and nearly as much as Germany - France is like 4 times the size of BD and it has ideal conditions to grow potatoes. It's agricultural yields is now exploding and so get ready to see BD becoming a major food exporter in some foodstuffs by the end of this decade.

 

[rainbowrascal]

1.5bn will be added to forex in the next few days as exporters will draw in their earnings. Limited load shedding will continue until november, as electricity demand will fall around 7000MW in winter. Also Rampal and Banshkhali coal plant is also scheduled to go into operation in dec/jan, which will help us minimise generation from oil based power plants.

 

[Bilal9]

I appreciate BD leadership for being realistic rather than doing things to keep up appearances.

Yes BD is doing better than ever, but we cant pretend to be untouchable. The world is in financial crisis, so the govt has tightened spending. Load shedding, curbs on unnecessary imports, taking extra loans as precaution are all excellent, sensible moves at this time.

I also suggest a cap on tourist visits to India, unless they are dire medical emergencies. At least customs should put in stiff tariffs on bringing these India-purchased items back in luggage.

We are losing close to around USD 20 Billion a year with women going to India buying useless shaadi (Saari, Lehenga, Jewelry) items from cow belt Sanghi business people in Kolkata and Delhi.

Why does govt. not need a clearance on the reason to travel to India? It should be part of immigration formalities.

 

[BananaRepublicUK]

I also suggest a cap on tourist visits to India, unless they are dire medical emergencies. At least customs should put in stiff tariffs on bringing these India-purchased items back in luggage.

We are losing close to around USD 20 Billion a year with women going to India buying useless shaadi (Saari, Lehenga, Jewelry) items from cow belt Sanghi business people in Kolkata and Delhi.

Why does govt. not need a clearance on the reason to travel to India? It should be part of immigration formalities.

Yep!

Stop these idiots visiting mazars and shopping trips.

Put a cap on the number of visits.

What a bloody waste of foreign currency!!!

Going to a country calling you termites.

These buggers have no shame!!