S&P Global Ratings on Tuesday lowered Bangladesh's long-term rating outlook to negative from stable, citing risks the country's external liquidity position could deteriorate in the next year while foreign exchange reserves remain under pressure.

The ratings agency expects the economy to expand between 6% to 6.4% annually between 2024 and 2026. Bangladesh's gross domestic product (GDP) growth fell to 6.03% in the financial year ended June 2023.

The South Asian nation is struggling to pay for imported fuel because of a dollar shortage and its dollar reserves have shrunk by more than a third since Russia's invasion of Ukraine to stand at $29.85 billion as of July 19.

S&P reaffirmed its BB- long-term and B short-term sovereign credit ratings on Bangladesh but said they could be lowered if external debt or liquidity metrics worsened further.

"Lower generation of current account receipts than we expect, a higher overall current account deficit than we forecast, or a failure to materially boost foreign exchange reserves would indicate downward pressure on the rating," S&P said.

Bangladesh needs favourable trade and financial flows to stabilise its external settings in the next 12 months, the agency added.

The country of nearly 170 million people has already had to secure a $4.7 billion loan from the International Monetary Fund this year as it deals with higher costs of imported fuel and food.

The negative ratings outlook reflects the deteriorating economic conditions and could hamper foreign investment, further weakening the confidence of international lenders, said Khondaker Golam Moazzem, research director at think tank Centre for Policy Dialogue.

"This would cause either more uncertainty and more costs to weigh the growing risks of uncertainty in repayment," he said.

Moazzem said measures were needed particularly in subsidy management and energy imports, which are the main weaknesses in the foreign exchange reserve situation.

"The government needs to take bold actions in these regards including substituting importing energy by exploring gas and substituting energy import for power, agriculture by solar based and other renewable energy measures," he added.