(Bloomberg) -- Bangladesh’s sovereign rating outlook was cut by Fitch Ratings to negative from stable as declining reserves and a squeeze in dollar liquidity increased the South Asian nation’s vulnerability to shocks.

Fitch joins S&P Global Ratings in downgrading the outlook on Bangladesh even after the South Asian country secured a $4.7 billion bailout from the International Monetary Fund in January. Moody’s Investors Service cut Bangladesh’s credit rating in May.

“The country’s incremental policy response, including exchange-rate system changes, and continued support from external official creditors, has been insufficient to stem the fall in foreign reserves and resolve domestic US dollar-liquidity strains,” analysts led by Sagarika Chandra said in a statement Monday. 

The long-term rating was affirmed at BB-, below investment grade and at par with South Africa. Bangladesh should be able to meet its external debt obligations over 2024-2025, even with lower external buffers, Fitch said.

Reserves will remain under pressure due in part to a still-managed exchange rate, elevated oil prices and a further relaxation of import restrictions, Fitch said. This in turn will widen the current-account deficit through to 2025, it added. 

While the central bank pledged in June to shift to a market-driven exchange rate, the currency is still capped though the limit has been gradually eased in recent months. The nation’s dollar stockpile dropped to $21.7 billion as of Sept. 13, based on IMF rules, from $24.7 billion in June. 


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