‘Reforms, liquidity and revenue vital to economic stability’

Staff Reporter :

Delivering structural reforms, improving external liquidity, and boosting revenue collection will be critical for Bangladesh’s macroeconomic stabilisation, American-British credit rating agency Fitch Ratings said in a statement on Sunday.

Bangladesh’s general election, held on February 12, has reduced near-term political and policy uncertainty, which could support improvements in macroeconomic stability, it said.

The Bangladesh Nationalist Party (BNP)-led alliance has secured a parliamentary supermajority, alongside a majority “yes” vote in a referendum that could enable constitutional reforms.

However, longstanding credit constraints – weak governance, banking-sector fragilities, and a fragile external liquidity position – mean the new government’s ability to execute its macroeconomic and fiscal reform agenda will determine the rating impact, Fitch noted.

Meanwhile, the referendum approval could support constitutional changes aimed at strengthening institutions; for example, shifting to a bicameral system from a unicameral one, strengthening judicial independence, and instituting term limits for the prime minister.

“However, implementation could be complex and time-consuming, keeping execution risk elevated.”

The ratings agency underscored that reform continuity, especially under the $5.5 billion programme with the International Monetary Fund, alongside stronger tax mobilisation and careful management of foreign-exchange reserves, will be decisive in anchoring stability and supporting sustainable growth.

“The reform agenda appears consistent with the macro-stabilisation agenda under the IMF programme,” Fitch said, but cautioned that “ongoing reform implementation and the durability of such reforms beyond the IMF programme will be a key condition for facilitating macroeconomic stability and growth.”

At the same time, external buffers remain a near-term watchpoint. “External liquidity remains another near-term indicator even as reserves improve,” Fitch noted, adding that maintaining macro-stabilisation policies is essential to “keep external financing risks in check.”

On the fiscal front, Fitch described Bangladesh’s “structurally low revenue intake” as “a key weakness,” pointing to the manifesto’s goal of raising the tax-to-GDP ratio to 10 percent through tax administration reforms, fewer exemptions, and a broader tax base.

“This matters for credit quality,” the agency said, signalling that revenue reform will be central to easing pressure on public finances and ensuring lasting stability.Reform, external liquidity, revenue drive key to Bangladesh’s economic stability: Fitch