STAR BUSINESS REPORT

Bangladesh’s political crisis has further undermined sovereign credit support since S&P Global Ratings lowered its long-term sovereign credit rating on July 30 this year, the American credit rating agency said yesterday.

However, credit metrics may still support the ratings at the current level if the situation stabilises soon, it said.

The protests that led to the abrupt resignation of Sheikh Hasina from the post of prime minister on August 5 have exacerbated downside risks to economic growth, fiscal performance, and external metrics, it said.

The damage to credit metrics may be contained if the socio-political situation normalises soon and Bangladesh forms a new government, the S&P said in a bulletin.

“While credit buffers have diminished, we would not expect immediate strong pressures on the credit ratings,” it said.

Continued disruptions to social stability could weigh more heavily on credit metrics, dampening economic growth and government revenue, it said.

“In this scenario, exports would be materially lower than our expectations, with a more prolonged impact on Bangladesh’s external balance sheet,” said the S&P.

“Materially lower exports could weaken the generation of foreign exchange (forex), further diminishing the central bank’s usable reserves,” it said. A normal flow of remittances will also be crucial for Bangladesh to avoid a more acute forex shortage, the bulletin read.