COLOMBO (News 1st) – Fitch Ratings releasing a statement said recent political developments in Sri Lanka is likely to make policy implementation slower and challenging while risking the overall fiscal outlook.

The Hong Kong based rating agency warned that continued political unrest amid large upcoming debt maturities and low reserves could make Sri Lanka vulnerable to shifts in global investor confidence. Investor confidence could be impacted by extended periods of uncertainty and waning commitment to the IMF programme. Election cycles could also distract the government from reforms and succumb to pressure for more populist policies.

Fitch Ratings said approval of fuel price reforms are requirements to complete the IMF’s next review, and further delay in its implementation could raise risks to the island’s fiscal outlook. Gross External Debt was equivalent to 59% of GDP in 2017. A quarter of this amounting to USD 15 billion is due to be paid in 2019-22.

Fitch Ratings further said a high proportion of public debt is denominated in foreign currency, which could weaken repayment ability should the rupee continue on its downward trend. The rupee has weakened 2.4% against the USD so far in 2018.

– By Charitha Fernando.

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