Sri Lanka’s high debt to GDP, COVID-19 to hinder infrastructure development

Sri Lanka’s high debt to GDP, COVID-19 to hinder infrastructure development

Sri Lanka’s high debt to GDP, COVID-19 to hinder infrastructure development

Written by Staff Writer

22 Apr, 2020 | 10:41 am

COLOMBO (News1st): Sri Lanka’s high debt to GDP levels and lower revenues stemming from slower economic activity could leave little fiscal room for infrastructure development in the country during the next two years, Fitch Ratings said on Wednesday.

The rating agency Fitch also rated Sri Lankan corporates in consumer goods retail, construction and hotels among the most affected by the coronavirus pandemic in The country.

“The ultimate impact on ratings over the next one to two years is highly uncertain and will depend on its eventual spread, the knock-on effects of measures introduced to control it, and how long these effects last,” Fitch said in a statement.

Fitch currently expect a gradual moderation of the Corona impact in 3Q and 4Q – provided that the pandemic is brought under control, with a full recovery in operating cash flow at least 12-18 months away.

Fitch expects both state and private-sector construction projects will face delays until economic conditions stabilise.

“Hotels will be one of the hardest-hit sectors, with tourist arrivals unlikely to resume to pre-pandemic levels until the COVID-19 spread is contained worldwide.”

The rating agency added, Companies with limited rating headroom to withstand prolonged disruption could be subject to negative rating action and corporates facing liquidity pressure could also see some stress on their ratings.

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