US-based credit ratings agency S&P Global downgraded Bangladesh鈥檚 credit rating on Tuesday, citing pressures on external metrics and the ongoing violence in the country.
The credit ratings agency lowered Bangladesh鈥檚 long-term sovereign rating from BB- to B+, with a stable outlook.
The downgrade to B+ reflects Bangladesh鈥檚 modest per capita income and limited fiscal flexibility due to low revenue generation and a high interest burden.
Additional rating constraints include evolving administrative and institutional settings, according to S&P.
S&P balanced these concerns against consistently strong economic growth, a moderate public debt burden, and an external position supported by engagement with bilateral and multilateral development partners, large remittances from overseas Bangladeshi workers, and a globally competitive garment manufacturing sector.
S&P highlighted weakening external liquidity, as evidenced by the sustained depletion of Bangladesh鈥檚 official foreign exchange reserves.
A report on its web site stated that macroeconomic policies enacted in May 2024, such as transitioning to a crawling-peg exchange rate regime, allowing the taka to depreciate and tightening monetary policy, could help rebuild external buffers, though progress would likely be gradual.
The agency noted persistent pressures on Bangladesh鈥檚 external metrics, marked by a continued decline in foreign exchange reserves despite import compression measures by the Bangladesh Bank and a smaller current account deficit.
鈥楪ross external financing needs now exceed the sum of current account receipts and usable reserves,鈥� the report added.
The report also mentioned that Bangladesh was grappling with widespread student-led protests, reportedly resulting in over 200 deaths, according to local news sources.
In May, Fitch downgraded Bangladesh to B+ from BB- due to a sustained weakening of external buffers. Bangladesh has recently sought credit assistance from several countries to address its dollar shortage and declining foreign exchange reserves.