Standard & Poor’s (S&P) has reaffirmed Bangladesh’s long-term sovereign credit rating at ‘B+’, maintaining a stable outlook for the country.
The international rating agency also affirmed Bangladesh’s short-term rating at ‘B’.
S&P’s latest assessment, issued on 24 July, highlights the gradual stabilization of Bangladesh’s external liquidity, bolstered by a steady increase in official foreign exchange reserves.
The rating agency credited macroeconomic reforms over the past 18 months, including a flexible exchange rate policy and tightened monetary measures, for improving foreign exchange liquidity.
However, S&P raised concerns about the potential risks associated with the United States’ recent trade measures, particularly the 35% tariff on Bangladeshi exports, which could negatively affect trade relations and economic stability.
The stable outlook reflects S&P’s positive view on Bangladesh’s real GDP growth, which remains strong compared to its regional peers.
Despite political turbulence and external pressures, S&P projects that Bangladesh’s economy will continue to grow at around 6.1% over the next three years, assuming political stability is restored and external conditions improve.
However, S&P warned that the ratings could be downgraded if Bangladesh’s external position worsens, particularly if net external debt consistently exceeds 100% of current account receipts.
The agency also noted that further economic slowdowns or a failure to boost foreign exchange reserves could negatively impact the country’s rating.
On a more optimistic note, S&P indicated that an improvement in Bangladesh’s fiscal and external metrics could lead to an upgrade.
This would require substantial increases in foreign exchange reserves or current account receipts, alongside a sustained reduction in government debt accumulation.
Despite challenges such as modest per capita income and low revenue-generation capacity, S&P acknowledged the country’s ongoing economic growth and the support it receives from international development partners and remittances from its overseas workers.
These factors provide a cushion for Bangladesh’s external financial stability.
The report also discussed the constraints on Bangladesh’s fiscal policies, including the high interest burden and limited fiscal flexibility.
Despite these challenges, the country’s garment industry remains a key driver of export growth, helping stabilize the external financial position.
Bangladesh’s economic outlook hinges on continued implementation of reforms and stabilization of its political environment.
S&P flagged Bangladesh’s narrow revenue base as a significant issue, noting that it limits the government’s ability to respond to fiscal stress.
Public debt remains moderate, but the country’s interest burden remains high, at about 26% of government revenues.
While the fiscal deficit is expected to stabilize, the country’s reliance on domestic and foreign borrowings continues to increase.
On the external front, Bangladesh’s current account deficit has improved, narrowing to about 0.1% of GDP for fiscal 2025, compared to 1.5% the previous year.
The increase in remittance inflows and higher export growth also contribute to Bangladesh’s external resilience.
S&P’s analysis pointed to the challenges Bangladesh faces in balancing fiscal needs with long-term economic growth.
However, the country’s ongoing reforms, supported by the International Monetary Fund’s (IMF) Extended Credit Facility and Resilience and Sustainability Facility, are seen as critical to ensuring continued economic stability.
S&P had cut Bangladesh’s rating to ‘B+’ from ‘BB-’ in July 2024, citing persistent pressures on the country’s external metrics. The short-term rating was kept unchanged at ‘B’.