Lanka’s external and public finances a concern, macroeconomic performance stabilising: Fitch

Monday, 15 July 2013 01:16 - - {{hitsCtrl.values.hits}}

Sri Lanka’s external and public finances are of concern whilst macroeconomic performance is stable according to Fitch. In its latest overview that Asia Pacific sovereigns, Fitch said Sri Lanka’s Foreign Currency (FC) and Local Currency (LC) ratings have been affirmed at BB- with Stable Outlook in April 2013. This balances the strength of the country’s resilient growth performance and strong payment record against the weaknesses of its fiscal and external balance sheets

Fitch said the Sri Lankan economy was growing at a more sustainable level as real GDP grew by 6.0% YoY in Q113 and CPI pressure has moderated, rising by 6.8% YoY in Q213 “Sri Lanka’s external finances remain a source of concern due to a heavy external debt refinancing schedule, where an average of $ 1.9 billion per annum in sovereign debt is projected to mature during 2013-2015,” it said. Fitch said foreign reserves, however, remain at a healthy level, standing at $ 6.9 billion at end-April 2013. It also said progress on fiscal consolidation has been slow as the budget deficit fell to 6.4% of GDP in 2012. According to Fitch the key rating drivers for Sri Lanka are on the upsides: Sustained improvements in both the public and external finances whilst on the downside was an intensification in external financing risks and an extended period of overheating or a significant deterioration in the public finances. Overall for Asia Pacific Fitch said its latest overview the region’s sovereigns, while broadly on Stable Rating Outlook, will be tested by shifting investor risk appetite amid a relative shift in the outlook for emerging versus advanced economies. “This will emphasise the importance of credit fundamentals such as credible policy frameworks and robust fiscal positions,” Fitch’s Head of Asia-Pacific Sovereigns Andrew Colquhoun said.