Bangladesh’s 12 February general election has reduced near-term political and policy uncertainty and could support improvements in macroeconomic stability, Fitch Ratings said on Sunday.
The global rating agency said that the BNP-led alliance secured a parliamentary supermajority alongside a majority “yes” vote in a referendum that could enable constitutional reforms.
However, it warned that “longstanding credit constraints – weak governance, banking-sector fragilities and a fragile external liquidity position – mean the new government’s ability to execute its macroeconomic and fiscal reform agenda will determine the rating impact.”
Fitch said the result provided greater political clarity following the August 2024 overthrow of the Awami League government and a prolonged caretaker period that advanced several reforms.
The Bangladesh Nationalist Party won 209 seats, Jamaat-e-Islami and its allies secured 77, and smaller parties took the remainder of the 299 seats contested.
The two-thirds parliamentary majority of the Bangladesh Nationalist Party alone should support implementation of its policy agenda and reduce the risk of a prolonged political vacuum that could complicate economic decision-making, it said.
Bangladesh is rated B+ with a Stable outlook.
Despite the election win, Fitch said political risk remains given Bangladesh’s history of polarisation and periodic pre-election violence.
Renewed tensions could emerge if election promises prove difficult to deliver and the government underperforms expectations, while the military may continue to play a role in politics, it added.
The referendum approval could support constitutional changes such as shifting to a bicameral system from unicameral, strengthening judicial independence and instituting term limits for the prime minister, though implementation could be “complex and time-consuming”, keeping execution risk elevated.
Fitch said policy signals in the Bangladesh Nationalist Party manifesto indicate the new government is likely to sustain economic and fiscal reforms initiated under the caretaker government.
The agenda also points to higher social spending, which could add pressure to public finances if revenue mobilisation underperforms and test the authorities’ ability to balance growth and electoral commitments with fiscal consolidation.
The reform direction appears consistent with the $5.5 billion International Monetary Fund programme that began in January 2023 and runs through 2026-2027, although uncertainties remain around durability of reforms beyond the programme period.
The manifesto’s fiscal centrepiece is a medium-term goal to raise the tax-to-GDP ratio to 10 per cent through tax administration reforms, fewer exemptions and a broader tax base, alongside a near-term revenue increase of 2 per cent of GDP.
Fitch projects general government revenue to GDP to reach 8.6 per cent by fiscal year 2027, from 7.8 per cent in fiscal year 2025, underscoring that Bangladesh’s structurally low revenue intake remains a key credit weakness.
The manifesto also outlines a pro-private-sector development agenda, including simplifying licensing, offering incentives for export-oriented sectors and lifting foreign direct investment to 2.5 per cent of GDP from around 0.4 per cent in fiscal year 2025.
Its pledge to strengthen banking governance and tackle non-performing loans could, if successful, address a key constraint on the sovereign credit profile, Fitch said.
External liquidity remains a near-term indicator even as reserves improve.
Foreign-exchange reserves reached $29.7 billion as of February 10, up from $22.3 billion at the end of fiscal year 2024 and $26.9 billion in fiscal year 2025.
A manageable external debt repayment profile and the prevalence of government-backed debt help contain refinancing risks, but underscore the importance of maintaining macro-stabilisation policies to keep external financing risks in check, Fitch said.
