Fitch Ratings has altered Bangladesh’s outlook to “negative” from “stable” due to increasing external financing pressures and macroeconomic vulnerabilities associated with exposure to the Middle East conflict.
The global credit agency maintained Bangladesh’s long-term foreign-currency issuer default rating (IDR) at B+, reflecting its ability to repay foreign-currency-denominated debt over time.
In a recent statement, Fitch expressed concerns about the Middle East conflict’s impact on Bangladesh, particularly regarding energy imports, remittances, and their associated risks. Approximately half of the country’s remittances originate from the Middle East, while crude oil and petroleum products make up nearly 15% of imports, valued at around $10 billion in 2025.
While strong remittance inflows in the current fiscal year offer some support to external finances, uncertainties surrounding the conflict’s duration pose significant risks, according to Fitch.
The agency highlighted the importance of reforms addressing policy framework weaknesses, public finances, and the financial sector to enhance the economy’s resilience. Fitch also mentioned Bangladesh’s moderate government debt, access to concessional external financing, and challenges related to external liquidity, governance, financial sector, and structural metrics compared to peers.
Despite having relatively low external reserves, Bangladesh faces risks from wider current account deficits, increased demand for foreign currency, or reduced external financing, potentially leading to currency and reserve pressures. Fitch also expressed concerns over the uncertainty surrounding the government’s commitment to reforms.
The agency pointed out fiscal weaknesses, including low government revenue-to-GDP ratio, inflationary pressures from essential commodities shortages, and projected budget deficits. It anticipated inflation to hover around 9% in fiscal year 2027.
Fitch projected Bangladesh’s economic growth at 3.7% in FY26 and 3.5% in FY27, cautioning about challenges from high energy prices, global uncertainties, declining garment exports, and banking sector vulnerabilities, especially among state-owned banks.
Fitch expects Bangladesh’s public debt to stabilize around 38% of GDP in the medium term but highlighted risks from banking sector liabilities, state-owned enterprises’ debts, and higher borrowing costs. Additionally, the rising interest-revenue ratio poses further strains on public finances, exceeding the global median by the end of 2025.
