Moody’s report cautions about poll-time politics
International credit rating agency Moody’s Investors Service warns that the escalating political turmoil in the run up to the national elections may weigh on Bangladesh’s sovereign rating and eventually hurt its economy. In its report in late September, Moody’s noted that the election tension among major political parties was different this time as Islamist forces had emerged as an additional risk in this otherwise secular state.
One of the two top international rating agencies that prepare credit ratings on Bangladesh, Moody’s has so far given the country a steady rating which helped the country in investment and trade.
But this time, centring the elections the agency is speculating three scenarios, two of which would affect the country’s sovereign worthiness.
The first scenario having negative implications is, “If both parties continue to grapple over the institution of a caretaker government, we could see a repeat of the situation in 2007 when the military was forced to intervene.”
Predicting the credit implication of such a scenario Moody’s said, during the previous election cycle, the military-led government was successful in restoring a state of calm and taking measures to alleviate corruption. However, delays in the democratic election process, and implications of the political uncertainty for a prolonged period of time would undermine investor confidence, especially foreign investment, depress growth, and derail the normal course of policy reforms. This would weigh on the sovereign rating.
According to the second scenario, even if elections are held on schedule, continued strikes and political tensions would weigh on investor sentiment and on economic growth.
Moreover, the lack of permanent solution to the electoral mechanism suggests that escalating tensions and violent protests would resume during the next election cycle, said Moody’s report.
The best scenario would be to have a mutually agreeable electoral system that would lead to a more stable political situation with limited event risks.
Moody’s said, although Bangladesh was a secular state, the recent rise of Islamist parties added the risk of religious factors becoming entwined with political aspirations. In early May, the growing role of Hefajat-e-Islam became apparent when the party was able to organise two-day-long protests demanding anti-blasphemy law which quickly turned violent.
The agency said, another Islamist party, Jamaat-e-Islami, which had been an ally of the BNP, had recently been banned from participating in polls, because its charter was seen as violating Bangladesh’s secular constitution.
The banning of Jamaat might be seen as being partly driven by the widespread protests in Shahbagh earlier this year, and could well lead to a further escalation in protests in the run-up to elections, said Moody’s report.
-With The Daily Star input
