Fitch Ratings downgraded Bangladesh’s long-term foreign-currency issuer default rating to “B+” from “BB-” due to weakening external buffers. The outlook remains stable. This downgrade reflects continued foreign exchange reserve declines and domestic dollar shortages, despite recent policy reforms.
The Fitch report highlights a favorable medium-term growth outlook, supported by the garment sector and remittances. However, near-term growth is projected to moderate to 5.3% in FY24 due to dollar shortages and high inflation. Gross government debt is expected to rise gradually to 40% of GDP, still below the “B” median of 55%.
Fitch also noted the weak banking sector, with a non-performing loan ratio of 9% in 2023, and 21% for state-owned banks. The sector could pose contingent liabilities if credit stress intensifies. The removal of lending rate caps is seen as a step towards improving banking sector profitability.
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