The Fitch Ratings expects broad policy continuity in Bangladesh following the government's general election win, in a vote boycotted by the main opposition Bangladesh Nationalist Party, although external challenges remain.
The Awami League continues to be in a strong position to implement its policy agenda, focused on lowering the poverty rate, developing infrastructure, improving healthcare, strengthening resilience to climate risks and achieving upper middle-income status by 2030.
Bangladesh's external challenges remain pressing. "We revised the Outlook on Bangladesh's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Negative from Stable in September 2023, while affirming the IDR at 'BB-'".
This partly reflected a deterioration in external buffers, with official reserves falling to USD21.7 billion as of 4 January 2024, less than half their historic peak in 2021. This has increased Bangladesh's vulnerability to shocks.
Greater exchange rate flexibility could help with rebuilding official reserve buffers. However, it could also add to inflation pressures in the near term. The election was accompanied by some violence and the US has said that it was not free and fair, but we do not expect this to hurt Bangladesh's efforts to source external financing.
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