FROM PAGE B1

Fitch said Bangladesh’s low government revenue-to-GDP ratio remains a key fiscal weakness, falling to 7.9 percent in fiscal year 2024-25 from 8.3 percent a year earlier.

Revenue collection is constrained by large tax exemptions, weak tax administration and poor compliance, contributing to wider fiscal deficits. The agency projected a budget deficit of 3.6 percent of GDP by 2027.

“Inflationary pressures are high, due partly to a shortage of essential commodities,” Fitch said, adding that price rises in petroleum and liquefied petroleum gas could fuel inflation further.

The agency expected that overall inflation would remain around 9 percent in fiscal year 2027.

Bangladesh economy is projected to grow by 3.7 percent in FY26 and 3.5 percent in FY27.

“Prolonged high energy prices and rising global uncertainty could further weaken growth. Ready-made garment exports are declining due to redirected orders following reciprocal tariffs, weaker global demand, and higher domestic production costs.”

Fitch said banking sector vulnerabilities remain elevated, particularly among state-owned banks, and warned that the non-performing loans ratio could rise once regulatory forbearance measures are withdrawn, creating contingent liability risks.

“This remains a source of contingent liability if credit stress intensifies.”

The agency expects Bangladesh’s public debt to stabilise at about 38 percent of GDP over the medium term.

However, it mentioned that risks remain from potential liabilities in the banking sector, debt of state-owned enterprises and higher borrowing costs.

Fitch also noted that the interest-revenue ratio has been rising and reached about 29 percent, more than double the median of 14 percent as of the end of 2025, adding further pressure on public finances.