The government has approved the Bangladesh Bank’s proposal of entering into agreement with international credit rating agencies for obtaining sovereign credit rating, a yardstick for attracting foreign direct investment and short-term borrowings by the country’s private and public sectors, official sources said.
The finance minister, AMA Muhith, in the past week approved the central bank proposal for the agreement with international credit rating agencies at an envisaged one-time expenditure of Tk 1.50 crore and annual expense of Tk 50 lakh.
‘The government and local financial organisations with sovereign credit rating will be able to easily take trade credit and suppliers’ credit from the foreign sources,’ said a senior official of the finance minister.
The official also said that as the development partners and many foreign countries consider Bangladesh a risky country, good sovereign credit rating will enhance the country’s image and help local financial organisations having low cost borrowings from foreign sources.
Typically, a credit rating tells a lender or investor the ability of the borrower to pay back a loan. However, in recent years, credit ratings have also been used to adjust insurance premiums, determine employment eligibility etc.
The sources said that Bangladesh will sign an agreement with two international companies by the end of June and the central bank expects the first credit rating report by end of the third quarter of this calendar year.
The board of directors of the central bank has approved the selection of two companies — Standard and Poor’s International, and Moody’s Singapore Pte. Ltd — after the bank’s proposal evaluation committee carried out their financial and technical evaluations.
Bangladesh Bank will pay around Tk 97.3 lakh in the first year and Tk 83.3 lakh in the next year as fees for the rating.
‘Sovereign credit rating will definitely reduce the London inter-bank offer rate and help obtain low-cost funds from foreign sources,’ former finance adviser AB Mirza Azizul Islam told New Age.
The central bank has been working since 2007 to obtain the country’s credit rating report to help mobilise funds from overseas sources and foreign investment agencies.
Source: The Daily New Age, 04 June 2009