Dhaka, Bangladesh (BBN)- Bangladesh's political crisis has further undermined sovereign credit support since S&P Global Ratings lowered long-term sovereign credit rating on July 30, 2024.
However, credit metrics may still support the ratings at the current level if the situation stabilizes soon, the global rating agency Standard & Poor's (S&P) said in its special bulletin on Wednesday.
The protests that led to the abrupt resignation of former prime minister Sheikh Hasina on August 05, 2024, have exacerbated downside risks to economic growth, fiscal performance, and external metrics.
The US-based agency said the damage to credit metrics may be contained if the sociopolitical situation normalizes soon and Bangladesh (B+/Stable/B) forms a new government. “While credit buffers have diminished, we would not expect immediate strong pressures on the credit ratings.”
It also said continued disruptions to social stability could weigh more heavily on credit metrics, dampening economic growth and government revenue.
“In this scenario, exports would be materially lower than our expectations, with a more prolonged impact on Bangladesh's external balance sheet,” the S&P noted. “Materially lower exports could weaken the generation of foreign exchange (forex), further diminishing the central bank's usable reserves.”
It also said a normal flow of remittances will also be crucial for Bangladesh to avoid a more acute forex shortage. “Other possible negative developments would include prolonged disruptions to communications systems that affect normal financial payments.”
BBN/SSR/AD