S&P affirms Bangladesh's sovereign credit rating, warns of US trade risks

South Asian country's external profile has stabilised and foreign exchange reserves have increased

S&P Global Ratings has affirmed Bangladesh’s long-term sovereign credit ratings at “B+” and short-term ratings at “B”, saying the country’s external liquidity is stabilising. However, it flagged heightened trade risk from US tariffs.

 

The outlook is stable.

 

Bangladesh’s macroeconomic policies over the past 18 months — transitioning to a more flexible exchange rate regime, allowing the taka to depreciate, and tightening monetary policy — have helped it rebuild foreign exchange liquidity, said the agency. Official foreign exchange reserves have improved, but Bangladesh faces heightened trade risk from “relatively high” US tariffs.

 

Bangladesh’s external profile is stabilising after a period of elevated pressure. Foreign exchange reserves increased by about $5 billion in FY25 to $26.7 billion now, marking a notable recovery from lows below $20 billion. Reserves cover about 4.1 months of current account payments, compared with 3.3 months at the end of FY24. 

 

 

Elections proposed in the first half of 2026 are likely to be critical for lasting political stability after the abrupt collapse of the Awami League government in July 2024.

 

"Bangladesh's volatile political situation may stymie the predictability of policy responses", said S&P Global.

 

A caretaker government led by Muhammad Yunus acts in lieu of an elected government. The Awami League has been banned from all political activities, and the caretaker government has tentatively slated elections for April 2026, S&P said.

 

The stable outlook on Bangladesh reflects the view that its real growth rate per capita will remain “very strong” compared with those of its peers. “The downside and upside risks to its external balance sheet are now broadly balanced. This is despite headwinds in the next 12-18 months stemming from external trade conditions,” S&P said. 

 

The 'B+' long-term rating reflects the economy’s modest per capita income and limited fiscal flexibility due to a combination of low revenue-generation capacity and the government's high interest burden. Evolving administrative and institutional settings represent additional rating constraints.

 

“We weigh these factors against the Bangladesh economy's strong long-term growth rate and the government's moderate debt burden.” The country’s credit profile also derives support from aspects like increasing external financial support, stemming from deep engagement with bilateral and multilateral development partners, and consistent remittances from overseas Bangladeshi workers.

 

Export receipts from Bangladesh's globally competitive garment manufacturing sector also provide support to the country's credit profile, said S&P.