Moody’s analyst says pressure on BD rising but crisis risk low

Staff Reporter :
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 , however, low,” said Camille Chautard, a sovereign analyst at Moody’s in Singapore.
Meanwhile, the government and other state-owned organizations have taken multiple initiatives to save the country’s forex reserve by cutting cost in different sectors.
According to sources, the forex reserves of Bangladesh have remained stable between $39 billion and $40 billion this month as the Bangladesh Bank has cut back on dollar sales for importing petroleum products.
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, according to Moody’s Investors Service.
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.”
The intensive effort by the Bangladesh Petroleum Corporation (BPC) to hunt dollars to meet its import demand coupled with the suspension of LNG purchase from the international spot market has eased pressure on the country’s foreign exchange reserves.
The forex reserves have remained stable between $39 billion and $40 billion this month as the Bangladesh Bank has cut back on dollar sales for importing petroleum products. The central bank has been selling $50 million to $70 million per day to banks this month, which was over $100 million in June.
The state-owned BPC has said it has diesel and furnace oil stocks for 32 days and more refined fuel is coming in a day or two. It will get an additional $500 million loan from a global lender which will give some relief in repaying oil import bills.
The energy ministry claims that oil imports to meet the demand for the next six months are in the pipeline.