Current low revenue base in Bangladesh could be further undermined by the measures taken in the budget for FY2023, including corporate tax cut, according to a latest report of American credit rating agency Fitch.
In its latest update, Fitch on Thursday also stated that the general government revenue-GDP ratio, which was 9.8 per cent in FY22, is a key credit weakness and much below the average.
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It said the budget targets a deficit of 5.5 per cent of GDP.
"The deficit could undershoot the government's target, as has occurred in the past, but our FY23 economic growth forecast trails the government's 7.5 per cent, meaning that the budget deficit is likely to slightly exceed the government's target," it said.
Regarding the governance in the banking sector, it said, "We regard the health of Bangladesh's banking sector and governance standards as weak, especially among public-sector banks."
Referring official data, the report stated that the system's gross non-performing loan (NPL) ratio reached 8.5 per cent by end March-2022, from 7.9 per cent at the end of 2021.
The NPL ratio of state-owned commercial banks, at 20.0 per cent, is substantially higher than the 5.8 per cent of private-sector banks, but the ratios could rise further once forbearance measures are withdrawn.
