STAR BUSINESS REPORT

Fitch Ratings has revised its outlook on Bangladesh to “negative” from “stable”, citing rising external financing pressures and macroeconomic vulnerabilities linked to exposure to the Middle East conflict.

The global ratings agency kept Bangladesh’s long-term foreign-currency issuer default rating (IDR), which measures the ability to service foreign-currency-denominated debt over time, unchanged at B+.

“The Middle East conflict creates significant downside risks, particularly through the supply and cost of energy imports and remittances,” Fitch said in a statement yesterday.

Nearly half of the country’s remittances come from the Middle East, while crude oil and petroleum products together account for almost 15 percent of imports, worth about $10 billion in 2025.

“Strong remittances so far in financial year 2026 provide near-term support to external finances; however, uncertainty regarding the conflict’s duration poses substantial downside risks,” said Fitch, an American-British credit rating agency.

In July 2025, S&P Global, another member of the “Big Three” global credit rating agencies, said Bangladesh’s long-term outlook was stable and kept the country’s foreign and local currency sovereign credit ratings at B+.

Fitch, which kept its outlook on Bangladesh stable in May last year, said in the latest statement that limited progress in reforms to address weaknesses in the policy framework, public finances and financial sector, along with continued weak institutional governance, would gradually erode the economy’s capacity to absorb shocks.

“The ratings reflect moderate government debt and access to concessional external financing, balanced against a still relatively weak external liquidity position, governance standards lower than those of peers, significant financial sector challenges, and lagging structural metrics compared with peers,” Fitch said.

It said Bangladesh has relatively low external buffers, with foreign exchange reserves standing at $29.5 billion in March 2026, equivalent to about four months of external payments.

The agency cautioned that wider current account deficits, stronger domestic demand for foreign currency or reduced external financing due to uncertainty around the IMF programme could renew pressure on the currency and reserves.

“Reform outlook uncertain,” it said, citing rising uncertainty over the new government’s willingness to push through changes.