S&P lowers rating for Bangladesh amid protests, curfew

S&P Global has lowered its long-term sovereign credit ratings for Bangladesh in both foreign and local currencies, due to the country’s increased external vulnerabilities.

The agency on Tuesday downgraded the rating to B+ from BB-, citing a sustained depletion of foreign exchange reserves.

The downgrade reflects “persistent pressure on Bangladesh's external metrics, marked in particular by a continued decline in foreign exchange reserves”, S&P said in a statement.

It kept the outlook on the long-term ratings stable as the country’s per capita real growth rate remains very strong compared with peers, “despite near-term headwinds from tighter financial conditions.”

“Macroeconomic policies enacted in May 2024--such as transitioning to a crawling-peg exchange rate regime, allowing the taka to depreciate, and tightening monetary policy--could help to rebuild external buffers, although the progress will likely be gradual”, the credit rating agency said. 

Meanwhile, a high interest expense ratio and a narrowing but still relatively large budget deficit will continue to weigh on fiscal assessment, it added.

The downgrade comes nearly two weeks after the government imposed a countrywide curfew to quell the violent quota reform protests that led to the deaths of at least 163 people and significant damage to government properties.