S&P Downgrades Bangladesh Amid Protests And Economic Strain
S&P Global has downgraded Bangladesh’s long-term foreign and local currency sovereign credit ratings from BB- to B+, citing elevated external vulnerabilities and weakening external liquidity. The outlook remains stable, with short-term ratings affirmed at ‘B’.
The downgrade reflects Bangladesh’s modest per capita income, limited fiscal flexibility and persistent external pressures, including a significant decline in foreign exchange reserves. As of June 2024, reserves were at $21.8 billion, down 35% from June 2022, covering only about 3.3 months of current account payments.
S&P noted that recent macroeconomic policies, including a crawling-peg exchange rate and tighter monetary policy, might help rebuild external buffers, but progress will be gradual. The rating agency also highlighted ongoing student-led protests, which have led to over 200 deaths and prompted government-imposed curfews and a telecommunications blackout.
Bangladesh’s external profile is under pressure despite strong economic growth and substantial remittances. S&P suggested that a rating upgrade could occur if Bangladesh improves its external metrics significantly, including a substantial rise in foreign exchange reserves.
Earlier in May, Fitch also downgraded Bangladesh to B+ from BB- due to weakened external buffers. The country has sought credit assistance from several nations, including China, to address its dollar shortage and declining reserves.
