American agency S&P has downgraded Bangladesh’s long-term credit rating from BB- to B+, citing pressures on the country’s external profile and sociopolitical issues. The downgrade reflects concerns over depleting foreign exchange reserves, increased debt servicing, high interest expenses, a significant budget deficit, and the lack of political opposition, which affects checks and balances.
Inflation is above the central bank’s target at 9.7% in June. Rising domestic interest rates, limited foreign exchange, and import restrictions are likely to keep domestic demand modest compared to long-term trends. However, S&P noted that it may raise Bangladesh’s rating if there are substantial improvements in external metrics, such as a significant increase in current-account receipts or foreign exchange reserves, ensuring gross external financing needs remain below 100% of current-account receipts and usable reserves on a sustained basis.
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