Dhaka: Global credit rater Standard & Poor's has reaffirmed its sovereign rating for Bangladesh with stable outlook in view of growth prospects and ongoing donor support.
It also indicated that the ratings could improve in future if Bangladesh improves some economic parameters.
The rating agency noted, however, the country's limited fiscal flexibility due to low revenue generation capacity and expenditure rigidities stemming from significant physical and human capital development needs, and a large subsidy regime.
"The stable outlook reflects strong growth prospects and ongoing donor support, which ensures low-cost and long- maturity external debt and minimises refinancing risk," S&P said in a statement.
The agency said Bangladesh's low wealth level at a per capita GDP of USD 637 (2011) is a key rating constraint, but it believes that such low incomes afford minimal policy and political flexibility when responding to exogenous shocks, or if severe policy adjustments are needed to avoid default.
It said Bangladesh's weak institutions and governance hamper investment and development, while its volatile political setting detracts from legislative efficiency and harbours the potential for instability.
However, it has affirmed 'BB-' long-term and 'B' short- term foreign and local currency sovereign credit ratings on Bangladesh with stable outlook as the transfer and convertibility (T&C) assessment remained 'BB-'.
Bangladesh is rated the second highest in South Asia behind India (BBB), and ahead of Sri Lanka (B+) and Pakistan (B-). Other countries in the BB category include Turkey, Philippines, Indonesia and Vietnam.
"We project the country's total revenue at 13 percent of GDP (including grants) in fiscal 2012, which ranks as one of the lowest among sovereigns we rate," S&P's credit analyst Agost Benard said.
"Limited fiscal flexibility contributed to years of public underinvestment, stunting the country's growth potential," Benard added.
PTI
