S&P Global Ratings has affirmed Bangladesh’s long-term sovereign credit rating at B+ and its short-term rating at B, citing recent improvements in the country’s official foreign exchange reserves and steady macroeconomic reforms. The outlook remains stable, the global ratings agency said on Friday.

The decision comes amid Bangladesh’s gradual economic recovery following a period of political disruption and external pressures. Foreign exchange reserves rose by $5 billion in the fiscal year 2024–25 to $26.7 billion, up from under $20 billion the previous year, now covering approximately 4.1 months of current account payments.

S&P attributed the improved reserves to a combination of monetary tightening, the shift to a more flexible exchange rate regime, and currency depreciation. It also acknowledged the role of consistent remittances, stable garment exports, and increased external financing from development partners.

Despite these improvements, the agency warned that the country continues to face structural challenges. Among them are a modest per capita income—estimated at $2,620 in FY25—a high interest burden due to low revenue collection, and dependency on official bilateral and multilateral lenders for foreign currency borrowing.

The report noted that the upcoming national elections, expected in early 2026, will be a turning point for political stability following the sudden collapse of the Sheikh Hasina-led government in August 2024. The political landscape remains fragile, with potential implications for the effectiveness of institutions and the implementation of policies.

Bangladesh also faces external trade headwinds, notably a looming 35% US tariff on its exports set to take effect in August, which S&P said could impact the country’s labor market and trade performance if left unresolved.

However, the rating agency emphasised that Bangladesh’s economic fundamentals remain resilient. It projected real GDP growth to accelerate to around 6.1% annually over the next three years, contingent upon greater political and external stability. It also noted that the country’s 10-year weighted average per capita GDP growth of 4.3% outpaces that of its peers in similar income brackets.

The report credited reforms under IMF-supported programs, including adjustments to petroleum pricing, improved GDP data reporting, and efforts to reduce reliance on expensive domestic borrowing tools, such as national savings certificates. Completion of the IMF’s combined third and fourth reviews in June unlocked $884 million under the EFF and an additional $453 million under the RSF.