ECGC downgrades Bangladesh’s country risk classification to “Moderate Risk” from “Moderately Low Risk”
ECGC has downgraded Bangladesh’s country risk classification from “B1” (Moderately Low Risk) to “B2” (Moderate Risk) in the backdrop of last month’s violent political upheaval, which lead to a regime change.
Once a country’s risk classification is downgraded, the premium to be paid by exporters for taking insurance cover on the goods & services they export to that country goes up.
However, Bangladesh continues to be in the open cover category, which will enable exporter-policyholders to obtain export insurance cover on a more liberalized basis.
In FY2024, India’s exports to its Eastern neighbour stood at $11.065 billion, accounting for 2.53 per cent of the country’s total exports of $437 billion.
In a note toBanks and policyholders, ECGC (formerly Export Credit Guarantee Corporation of India Ltd.) said: “It has been decided to modify the country risk classification of Bangladesh under the Short-Term and Medium-and-Long Term with effect from 08.08.2024. ECGC will continue to monitor the developments in Bangladesh and further review the cover, if necessary.”
As per ECGC’s FY23 annual report, Bangladesh was among the top five countries in which the company had underwritten major business during the reporting financial year. Besides Bangladesh, the other countries where ECGC had underwritten major business were — Cameroon, Laos, Nepal and Saudi Arabia.
Out of the development assistance in the form of concessional Lines of Credit (LOCs) aggregating $32 billion extended by the Government, Bangladesh accounts for about a quarter of this assistance. The LOCs are extended under the Indian Development and Economic Assistance Scheme (IDEAS) through the Exim Bank of India.
ECGC provides a range of credit risk insurance covers to exporters against loss in export of goods and services, offers export credit insurance cover to banks and financial institutions to enable exporters to obtain better facilities from them; and provides overseas investment insurance to Indian companies investing in joint ventures abroad in the form of equity or loan.