Global credit rating agency Moody's Ratings (Moody's) on Tuesday changed the outlook on Bangladesh to “stable” from “negative”, citing eased acute political and external pressures that have left risks more balanced.
Concurrently, Moody's affirmed Bangladesh's long-term issuer and senior unsecured ratings at B2, and affirmed its short-term issuer ratings at “not prime”.
The shift to a stable outlook reflects reduced political uncertainty following the post-election transition and a strong governing mandate, alongside an improved external position, the agency said.
Foreign exchange reserves rebuilt to around $32.9 billion by mid-2026 – covering over four months of imports – up from about $21.4 billion at end-2024.
The growth was supported by record remittances through formal channels, a more flexible exchange rate regime, and central bank foreign exchange purchases.
Moody's projected real GDP growth to recover gradually, reaching 4.3 percent in fiscal year 2026-27 before picking up to around 4.9 percent from FY28 as investment and industrial activity normalise, up from 4.1 percent in FY26 and 3.5 percent in FY25. Inflation is expected to stay around 9 percent before easing slowly.
The affirmation of the B2 rating balances Bangladesh's long-term growth potential – backed by favourable demographics, a large and diversified economy, and a competitive ready-made garment (RMG) sector – against structural vulnerabilities.
These include a narrow government revenue base, weak debt affordability with interest payments absorbing close to 30 percent of government revenue, and significant weaknesses in banking sector asset quality.
Addressing banking sector challenges, Moody's noted that recent reforms, including asset quality reviews, deposit protection legislation, and a medium-term resolution strategy developed with the International Monetary Fund (IMF), have disclosed system-wide non-performing loans (NPLs) estimated at around 32.8 percent. Recapitalisation needs to restore regulatory capital adequacy are estimated at roughly 10 percent of GDP to be phased over several years.
However, system-wide deposits grew by around 12 percent year-on-year to March 2026, signalling that banking sector weaknesses remain primarily a solvency rather than a liquidity challenge.
Moody's maintained Bangladesh's local-currency (LC) and foreign-currency (FC) ceilings at Ba3 and B2, respectively. Continued engagement with the IMF and other international financial institutions remains a vital anchor for external financing and structural reform momentum.