Written by Tharushan Fernando
01 Mar, 2016 | 8:58 pm
Fitch Ratings has downgraded Sri Lanka’s Long Term Foreign and Local Currency Issuer Default Ratings one notch to ‘B+’ from ‘BB-‘.
According to Fitch Ratings a negative outlook has been assigned to the IDRs.
The issue ratings on Sri Lanka’s senior unsecured foreign and local currency bonds are also downgraded to ‘B+’ from ‘BB-‘.
The report adds that the Country Ceiling is downgraded to ‘B+’ from ‘BB-‘ and the Short-Term Foreign-Currency IDR is affirmed at ‘B’.
Fitch said the rating action reflects increasing refinancing risks. A statement from Fitch said Sri Lanka’s external liquidity ratio, as measured by Fitch at the end of 2015, was 70.9%, which is far below the median of ‘B’-rated peers’ of 171.9% and the ‘BB’ median of 152.4%.
Another reason for the rating action was significant debt maturities. However, Fitch Ratings noted that the prevailing low oil prices will continue to support Sri Lanka’s current-account deficit in the near term. Fitch expects the current-account deficit to remain manageable at about 3% of GDP over 2016-17.
In terms of weaker public finances, the deterioration in Sri Lanka’s fiscal finances is driven partly by consistently low general government revenues.
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