S&P rating remains same

Despite scoring the same stable "BB-" in the long-term and "B" short-term sovereign credit ratings by S&P, a US-based financial services company for the last six years, the economy has witnessed steady growth with little fluctuation. The country is held back by some nagging problems associated with poor revenue-generation capacity and a serious shortage of basic infrastructure. The volatile nature of the country's politics has always been a wild card and when combined with poor administrative and institutional constraints actually holds back better economic growth. What has assisted Bangladesh to move forward in economic terms is the large inward remittance base of expatriate labour engaged in overseas markets.

Our ratings could certainly improve if we could address our infrastructure bottlenecks and although GDP growth rate is a healthy 5.4 percent, a better business operating environment would certainly help encourage investments (including foreign direct investment). Looking at the fiscal scenario, we find that S&P forecasts government debt to remain modest over the coming fiscal year, but again with marked shortfalls in social and infrastructure areas, the government will probably need to make greater financial commitments to overcome these problems in the long term.

That the government is putting emphasis on revenue generation is good news. The reforms being undertaken to streamline the VAT system in the current fiscal would certainly help. Regulatory weaknesses as in the central bank's limited independence and the underdeveloped capital markets are major weaknesses in the financial area. Overall, the country is progressing but the economy could do better if we could address our most pressing deficiencies.