S&P cuts Bangladesh credit outlook to negative

S&P Global Ratings has revised Bangladesh’s long-term sovereign credit outlook to negative from stable, warning that banking weaknesses, fiscal constraints and external risks could delay the country’s economic recovery.

The agency affirmed Bangladesh’s “B+” long-term sovereign rating and “B” short-term rating.

S&P identified poor asset quality and high levels of nonperforming loans as major risks, particularly at state-owned banks, where such loans account for about 40% of total lending.

Government revenue remains equivalent to about 8% to 9% of gross domestic product, while interest payments consume roughly 30% of revenue, the agency said.

S&P expects real economic growth to average 4.5% over the next three years. Foreign exchange reserves recovered to $32.9 billion in fiscal 2026, supported by stronger remittances.

The agency said it could lower Bangladesh’s ratings if economic growth fails to recover or the country’s external position deteriorates significantly.