Fitch Rankings-Hong Kong-22 February 2026: Bangladesh’s common election held on 12 February has decreased near-term political and coverage uncertainty, which may help enhancements in macroeconomic stability, says Fitch Rankings. The Bangladesh Nationalist Get together (BNP)-led alliance has secured a parliamentary supermajority, alongside a majority “sure” vote in a referendum that might allow constitutional reforms. Nevertheless, longstanding credit score constraints – weak governance, banking-sector fragilities and a fragile exterior liquidity place – imply the brand new authorities’s capability to execute its macroeconomic and monetary reform agenda will decide the score impression.
The election consequence supplies higher political readability following the August 2024 overthrow of the Awami League authorities and a protracted caretaker interval that superior a number of vital reforms. The BNP gained 209 seats, with Jamaat-e-Islami and its allies taking 77 and smaller events the rest, of the 299 seats contested. The 2-thirds parliamentary majority of the BNP alone ought to help its capability to implement its coverage agenda. The election additionally reduces the chance of a protracted political vacuum that might complicate financial decision-making.
Political danger nonetheless stays, regardless of the election win. Bangladesh’s (B+/Secure) historical past of political polarisation and periodic pre-election violence leaves scope for renewed tensions if election guarantees show troublesome to ship and the federal government underperforms expectations. The navy may proceed to play a task in politics.
In the meantime, the referendum approval may help constitutional adjustments geared toward strengthening establishments; for instance, shifting to a bicameral system from unicameral, strengthening judicial independence and instituting time period limits for the prime minister. Nevertheless, implementation might be complicated and time-consuming, retaining execution danger elevated.
Coverage indicators within the BNP manifesto point out the brand new authorities is more likely to maintain a path of financial and monetary reforms initiated underneath the caretaker authorities. The agenda additionally factors to larger social spending, which may add stress to public funds if income‑mobilisation measures underperform, and would take a look at the authorities’ capability to stability progress and electoral commitments with fiscal consolidation.
This reform agenda seems in step with the macro-stabilisation agenda underneath the USD5.5 billion Worldwide Financial Fund (IMF) programme that started in January 2023 and runs by 2026-2027. Nevertheless, there are nonetheless uncertainties across the financial agenda, and ongoing reform implementation and sturdiness of such reforms past the IMF programme shall be a key situation for facilitating macroeconomic stability and progress.
The manifesto’s fiscal centrepiece is a medium-term objective to boost the tax-to-GDP ratio to 10% by tax administration reforms, fewer exemptions and a broader tax base, alongside a near-term income improve of two% of GDP. This issues for credit score high quality as a result of Bangladesh’s structurally low income consumption stays a key weak spot. We undertaking common authorities revenue-GDP to achieve 8.6% by FY27, from 7.8% in FY25.
The manifesto additionally factors to a pro-private-sector growth agenda – simplifying licensing, providing incentives for export-oriented sectors and aiming to elevate international direct funding to 2.5% of GDP from a Fitch-estimated round 0.4% of GDP in FY25. Its pledge to strengthen banking governance and deal with non-performing loans may, if profitable, handle a key constraint on the sovereign credit score profile.
Exterior liquidity stays one other near-term indicator at the same time as reserves enhance. International-exchange reserves reached USD29.7 billion as of 10 February, up from USD22.3 billion within the fiscal yr ended June 2024 (FY24) and USD26.9 billion in FY25. A manageable exterior debt reimbursement profile and the prevalence of government-backed debt assist include refinancing dangers, but additionally underscore the significance of sustaining macro-stabilisation insurance policies that hold exterior financing dangers in verify.
Proceed Studying
