Sri Lanka falls further down in international credit ratings

‘Fitch Ratings’ has further downgraded Sri Lanka’s ability to repay foreign loans. ‘Fitch Ratings’ also noted that Sri Lanka’s foreign exchange reserves had fallen faster than expected in its final review.
Accordingly, Fitch Ratings has downgraded Sri Lanka’s Long-Term Foreign-Currency Issuer Default Rating (IDR) from ‘CCC’ to ‘CC’.
In a lengthy statement, Fitch Ratings states Sri Lanka’s external liquidity situation was deteriorating due to high foreign debt payments and limited cash inflows.
Accordingly, Fitch Ratings has focused on the high probability of default in the coming months.
Meanwhile, Fitch Ratings states Sri Lanka’s foreign exchange reserves have fallen faster than expected in its final review.
Since August, foreign exchange reserves have fallen by about $ 2 billion to $ 1.6 billion by the end of November, reflecting the adequacy of less than a month’s external payments.
‘Fitch Ratings’ states, “We believe that in the absence of new external financial resources in 2022 and 2023, it will be difficult for the government to meet its foreign debt repayments. The loan repayments include two $ 500 million international sovereign bonds due in January 2022 and two $ 1 billion international sovereign bonds in July 2022. Accordingly, Sri Lanka will have to repay a US $ 6.9 billion foreign loan by 2022. This is about 430% of the foreign reserves at the end of November. From 2022 to 2026, Sri Lanka’s cumulative foreign debt service is $ 26 billion.”