Fitch downgrades Sri Lanka to ‘B-’; Outlook Negative

Friday, 24 April 2020 18:27 - - {{hitsCtrl.values.hits}}

Fitch Ratings today downgraded Sri Lanka’s sovereign rating predicting the economic shock from COVID-19 will further erode rising public and external debt sustainability.

Accordingly the Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) have been changed to ‘B-’, from ‘B’. The Outlook is Negative. “The pandemic will especially hurt the tourism sector, which, combined with weaker domestic demand, will further damage Sri Lanka's public and external finance metrics,” the statement from the rating agency said.

Sri Lanka’s external financing challenges have increased in the current environment of global risk aversion and financial market volatility, with large upcoming external debt redemptions and limited foreign-currency (FX) reserves. Sri Lanka’s reserves are about $7.2 billion, but the country’s external debt payments from May to December 2020 amount to $3.2 billion, including a $1 billion international sovereign bond payment due in October.