Fiscal improvements to lag economic recovery in Bangladesh: Fitch | The Business Standard
Skip to main content
  • Latest
  • Economy
    • Banking
    • Stocks
    • Industry
    • Analysis
    • Bazaar
    • RMG
    • Corporates
    • Aviation
  • Videos
    • TBS Today
    • TBS Stories
    • TBS World
    • News of the day
    • TBS Programs
    • Podcast
    • Editor's Pick
  • World+Biz
  • Features
    • Panorama
    • The Big Picture
    • Pursuit
    • Habitat
    • Thoughts
    • Splash
    • Mode
    • Tech
    • Explorer
    • Brands
    • In Focus
    • Book Review
    • Earth
    • Food
    • Luxury
    • Wheels
  • Subscribe
    • Epaper
    • GOVT. Ad
  • More
    • Sports
    • TBS Graduates
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • Gallery
    • Long Read
    • Interviews
    • Offbeat
    • Magazine
    • Climate Change
    • Health
    • Cartoons
  • বাংলা
The Business Standard

Sunday
July 13, 2025

Sign In
Subscribe
  • Latest
  • Economy
    • Banking
    • Stocks
    • Industry
    • Analysis
    • Bazaar
    • RMG
    • Corporates
    • Aviation
  • Videos
    • TBS Today
    • TBS Stories
    • TBS World
    • News of the day
    • TBS Programs
    • Podcast
    • Editor's Pick
  • World+Biz
  • Features
    • Panorama
    • The Big Picture
    • Pursuit
    • Habitat
    • Thoughts
    • Splash
    • Mode
    • Tech
    • Explorer
    • Brands
    • In Focus
    • Book Review
    • Earth
    • Food
    • Luxury
    • Wheels
  • Subscribe
    • Epaper
    • GOVT. Ad
  • More
    • Sports
    • TBS Graduates
    • Bangladesh
    • Supplement
    • Infograph
    • Archive
    • Gallery
    • Long Read
    • Interviews
    • Offbeat
    • Magazine
    • Climate Change
    • Health
    • Cartoons
  • বাংলা
SUNDAY, JULY 13, 2025
Fiscal improvements to lag economic recovery in Bangladesh: Fitch

Economy

TBS Report
17 June, 2022, 09:25 pm
Last modified: 17 June, 2022, 09:30 pm

Related News

  • NBR's revenue growth gains momentum amid economic recovery
  • Recovery on some fronts, but investment gaps, banking instability still key concerns
  • External sector recovers but investment stagnates post-revolution
  • UK economy rebounds in August in boost to new govt
  • Bangladesh starts economic clean-up after Hasina’s exit

Fiscal improvements to lag economic recovery in Bangladesh: Fitch

Fitch projects the budget deficit to slightly exceed the government’s target

TBS Report
17 June, 2022, 09:25 pm
Last modified: 17 June, 2022, 09:30 pm
Fiscal improvements to lag economic recovery in Bangladesh: Fitch

Bangladesh's latest budget indicates that public finances in the fiscal year ending in June 2023 (FY23) will remain weaker than in the past, even as the country's economic recovery gathers pace, says Fitch Ratings.

However, Bangladesh has a record of posting deficits below those targeted in the budget, adds the New York-based credit rating agency in a report published on its website.

The budget targets a deficit of 5.5% of GDP in FY23, up from a revised estimate of 5.1% in FY22. This remains higher than the norm prior to the outbreak of the Covid-19 pandemic – the deficit averaged 3.5% of GDP in FY15-FY19. In contrast, the authorities expect the economy to expand by 7.5% in FY23, above the average of the same five-year period.

The Business Standard Google News Keep updated, follow The Business Standard's Google news channel

Fitch says that the deficit could undershoot the government's target, as has often occurred in the past. The authorities originally projected a deficit of 6.2% of GDP in FY22, but expenditure fell below budgeted levels and growth, at 7.25% according to provisional estimates, was above Fitch's expectations. However, the agency's forecast for economic growth in FY23, at 6.4%, is lower than the government's, and it expects the budget deficit to slightly exceed the government's target.

Government revenue/GDP is low, at just 9.8% in FY22, compared with a 'BB' category sovereign median of 27.3%. This represents a key credit weakness. Measures in the budget risk amplifying the problem, with the authorities cutting corporate tax rates without offsetting measures; for example, to 27.5% from 30.0% for non-listed companies and to 22.5% from 25.0% for one-person companies. Value added tax (VAT) exemptions have also been extended or introduced for certain goods categories. Offsetting this, VAT rates for other categories were increased and the budget proposes the removal of a provision that exempts those with no permanent establishment in Bangladesh from submitting income tax returns. A tax amnesty may also provide a one-off lift to tax revenue in FY23, although the medium-term impact is uncertain.

A failure to return the budget deficit to pre-pandemic levels in the next two to three years is unlikely to pressure Bangladesh's rating, which Fitch affirmed at 'BB-' with a Stable Outlook in November 2021.

Fitch estimates government debt/GDP at around 38% at FYE21, compared with a 'BB' median of 55%, indicating that Bangladesh has fiscal headroom at its current rating level. Even so, a lack of fiscal consolidation while economic growth is strong could increase the sovereign's vulnerability to economic shocks.

The risk of shocks has been highlighted by the pandemic and surging global fuel and food costs stemming from the Russia-Ukraine war. The latter effects have been relatively muted in Bangladesh so far, and the government's move to raise the allocation for subsidies, including those on fuel, gas, electricity and fertiliser, to 1.9% of GDP in FY23, from 1.7% in FY22, should further cushion the near-term impact. The authorities also increased funding for physical infrastructure under the annual development programme. If implemented effectively, this could alleviate supply-side bottlenecks and ease inflation in the longer run, adds the report.

Bangladesh's external metrics are a source of rating strength. The budget retains a 15% preferential tax rate for textiles, a sector that drives export growth. US imports of apparel from Bangladesh rose by 65% yoy in 4M22 to USD3.3 billion.

However, official foreign-exchange reserves fell to USD42.2 billion by end-May 2022, from USD46.2 billion at end-2021. This reflected rapid growth in goods imports, a slight decline in inward remittances and central bank intervention to slow the taka's depreciation, among other factors.

A continued drop in reserves – for example, in the context of weaker global growth hitting garment exports – would over time increase the risk of negative rating action on Bangladesh, according to Fitch.

Bangladesh / Top News

fiscal deficit / Fitch Ratings Inc / Economic recovery

Comments

While most comments will be posted if they are on-topic and not abusive, moderation decisions are subjective. Published comments are readers’ own views and The Business Standard does not endorse any of the readers’ comments.

Top Stories

  • Screengrab blurred
    Mitford murder sparks political storm as BNP on backfoot, Jamaat and others pounce
  • Representational image
    Some issues remain unresolved despite progress in 2nd round of US tariff talks: Press Minister Mortoza
  • US President Donald Trump gestures to the US flag flying on a new flagpole after stepping off Marine One returning from New Jersey at the White House in Washington, DC, US, 6 July 2025. Photo: Reuters
    Trump intensifies trade war with 30% tariffs on EU and Mexico

MOST VIEWED

  • Representational image
    In addition to 35% tariff, US demands 40% local value addition for 'Made in Bangladesh' goods
  • RAB Director General AKM Shahidur Rahman speaks at the press briefing on a fake bomb threat on Biman Bangladesh flight on Saturday, 12 July 2025. Photo: TBS
    Mother faked bomb threat on Biman flight to stop married son from flying with girlfriend: RAB
  • Screengrab blurred
    Killers bash in head of man with rock, stomp body with perverse pleasure
  • Photo: UNB
    Saima Wazed Putul ‘placed on indefinite leave’ from WHO role amid corruption allegations
  • How tender rules and a lone bidder stall a $2.5b power plant
    How tender rules and a lone bidder stall a $2.5b power plant
  • Bangladesh and US hold tariff talks on 11 July 2025. Photo: CA Press Wing
    Dhaka, Washington yet to agree on 20% of US tariff conditions: BGMEA

Related News

  • NBR's revenue growth gains momentum amid economic recovery
  • Recovery on some fronts, but investment gaps, banking instability still key concerns
  • External sector recovers but investment stagnates post-revolution
  • UK economy rebounds in August in boost to new govt
  • Bangladesh starts economic clean-up after Hasina’s exit

Features

The 2020 Harrier's Porsche Cayenne coupe-like rear roofline, integrated LED lighting with the Modellista special bodykit all around, and a swanky front grille scream OEM Plus for the sophisticated enthusiast looking for a bigger family car that isn’t boring. PHOTO: Ahbaar Mohammad

2020 Toyota Harrier Hybrid: The Japanese Macan

7h | Wheels
The showroom was launched through a lavish event held there, and in attendance were DHS Motors’ Managing Director Nafees Khundker, CEO Imran Zaman Khan, and GMs Arman Rashid and Farhan Samad. PHOTO: Akif Hamid

GAC inaugurate flagship showroom in Dhaka

8h | Wheels
After India's visa restriction, China's Kunming is drawing Bangladeshi patients

After India's visa restriction, China's Kunming is drawing Bangladeshi patients

1d | Panorama
Photo: Collected/BBC

What Hitler’s tariff policy misfire can teach the modern world

2d | The Big Picture

More Videos from TBS

Why is there a mystery surrounding the death of 'Jalibi' actress Humaira?

Why is there a mystery surrounding the death of 'Jalibi' actress Humaira?

22m | TBS World
Why cockpit audio deepens the mystery of Air India crash

Why cockpit audio deepens the mystery of Air India crash

52m | Others
Housing officer shot in Pallavi for not paying bribe

Housing officer shot in Pallavi for not paying bribe

1h | TBS Today
BNP does not protect criminals like Sheikh Hasina: Rizvi

BNP does not protect criminals like Sheikh Hasina: Rizvi

1h | TBS Today
EMAIL US
contact@tbsnews.net
FOLLOW US
WHATSAPP
+880 1847416158
The Business Standard
  • About Us
  • Contact us
  • Sitemap
  • Advertisement
  • Privacy Policy
  • Comment Policy
Copyright © 2025
The Business Standard All rights reserved
Technical Partner: RSI Lab

Contact Us

The Business Standard

Main Office -4/A, Eskaton Garden, Dhaka- 1000

Phone: +8801847 416158 - 59

Send Opinion articles to - oped.tbs@gmail.com

For advertisement- sales@tbsnews.net