Iran War Puts Bangladesh, Pakistan Economies at High Risk: S&P Report

Since these countries are particularly vulnerable to rising oil prices and potential supply disruptions, a prolonged price and supply shock in global energy markets could hit their sovereign credit ratings, the report states.

S&P Global Ratings, which provides analyst-driven credit ratings, research, and sustainable finance opinions, said such insights are essential for helping market participants translate complexity into clarity and make decisions with confidence.

Pakistan, Sri Lanka, and Bangladesh are showing signs of economic recovery. While progress has been made, sustained high energy prices and potential disruptions to trade and remittances could derail their fragile economies, the report states.

It also points out that Laos is comparatively less exposed due to its reliance on hydropower generation and a more balanced fiscal position. While still vulnerable to extended energy price and supply shocks, the conditions supporting the positive outlook on its long-term ratings remain intact for now.

"Our ratings on Bangladesh can likely withstand the short-term economic disruptions associated with our base-case scenario," the credit rating agency said.

However, the country faces mounting risks to growth, inflation, and its external balance if the rise in energy prices persists longer than anticipated.

Higher fuel prices are likely to stall the gradual decline in inflation over the next three to six months and could weaken the economy's recovery momentum.

The report points out that the Bangladesh economy is almost entirely reliant on imports for crude and refined oil products. Oil reserves are likely to last less than one month, after which measures to curb consumption may become more stringent if imports remain constrained.

Nearly 50 per cent of Bangladesh's electricity generation is gas-fired, with almost a quarter of its gas demand met through imports which could also potentially take a hit in case of a prolonged West Asia conflict.

The country is already grappling with persistently high inflation, which rose to 9.2 per cent in February from 8.6 per cent in January, alongside a prolonged slowdown in growth following the collapse of the previous government in mid-2024.

Bangladesh's revenue-to-GDP ratio is among the lowest of all rated sovereigns, estimated at around 9 per cent for the current fiscal year ending June 2026.

The war also poses an unwelcome headwind to Bangladesh's improving external balance position. Foreign exchange reserves rose to $29.6 billion as of March 12, 2026, up significantly from $19.7 billion during the same period in 2025, the report added.

- IANS