Credit ratings agency Fitch revised its outlook on Bangladesh’s sovereign credit on Wednesday from “stable” to “negative”, flagging pressure on foreign-exchange reserves, a frail banking sector and the spillover from the Middle East conflicts.

The agency affirmed Bangladesh’s long-term foreign-currency ⁠issuer ​default rating ​at “B+”. The ratings agency ​warned Bangladesh faced significant downside risks through higher energy import ​costs and potential ​disruptions to remittances.

Bangladesh draws nearly half its remittance income from the Middle East and relies on the region for a large portion of its annual $10 billion oil and LNG import bill. Sustained instability there, Fitch warned, could drive up import costs and disrupt remittance flows. Foreign-exchange reserves stand at $29.5 billion, sufficient for about four months of imports — a buffer the agency considers inadequate under current conditions.

The banking sector’s fragility weighed heavily on the decision. Non-performing loans hit 30.6 percent of total lending by the end of December 2025, concentrated largely among state-owned banks. Slowing private-sector credit growth has depressed investment and poses a threat to long-term expansion, according to Fitch Ratings.

The global rating agency, in a statement from Hong Kong, forecast GDP growth of 3.7 percent in fiscal 2026, decelerating to 3.5 percent the following year, as high global energy prices and broader instability take their toll. Inflation remains above 8.7 percent, well past the central bank’s 6.5–7 percent target, eating into household purchasing power.

Fitch also highlighted the government’s chronic revenue weakness. The tax-to-GDP ratio is just 7.9 percent. With debt servicing costs consuming 29 percent of state income, fiscal space for both budget management and development spending is shrinking.

The agency signalled that another sovereign rating downgrade could follow if reserves keep falling, revenue targets are missed or political resolve on banking reform falters. A return to a stable outlook, it said, would require tighter governance at state banks and a stabilisation of the exchange rate.