(Bloomberg) -- S&P Global Ratings lowered Bangladesh’s credit ratings to B+ from BB- due to a sustained decline in its foreign exchange reserves, nearly two weeks after the government imposed a curfew to quell deadly student protests.
The downgrade reflects a “persistent pressure on Bangladesh’s external metrics, marked in particular by a continued decline in foreign exchange reserves,” S&P said in a statement Tuesday. It kept the outlook stable as Bangladesh’s per capita real growth remains strong despite the “near-term headwinds.”
Bangladesh’s reserves stood at $21.78 billion at end-June, enough to cover three months of imports. It is likely to come under further pressure as the curfew shuttered key parts of the economy, including the garments export sector that brings in much-needed dollars.
The curfew remains in place with longer breaks while more businesses have started to reopen.
The developments suggest that the negotiations between Prime Minister Sheikh Hasina’s government, creditors and the International Monetary Fund for more money will take a renewed urgency. An industry body has said the curfews and internet shutdowns are estimated to have a $10 billion impact on the economy and the costs could go higher.
S&P said government measures to introduce some flexibility in the currency market with a crawling-peg exchange rate and a tighter monetary policy could help stem the sharp decline in foreign reserves though “progress will likely be gradual.”
Fitch downgraded Bangladesh’s credit rating in late May, saying the sustained weakening of Bangladesh’s external buffers may prove difficult to reverse respite policy reforms.
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