Fitch Upgrades Sri Lanka’s Credit Rating to ‘B-’ with Stable Outlook

Fitch Ratings has upgraded Sri Lanka’s Long-Term Issuer Default Ratings (IDRs) to ‘B-’ from ‘CCC+’, while maintaining a Stable Outlook.

The upgrade reflects the implementation of macroeconomic stabilisation policies and structural reforms, which have helped ease external financing risks and strengthened Sri Lanka’s resilience to economic shocks.

Fitch said the improved credit profile is supported by significant improvements in fiscal and external balances, along with a modest rebuilding of foreign exchange reserves.

The ratings agency expects fiscal discipline and efforts to increase government revenue to support sustained primary budget surpluses. This, in turn, should help keep government debt-to-GDP on a declining path and reduce the risk of renewed external imbalances.

However, Fitch noted that Sri Lanka’s credit profile remains constrained by high government debt and debt-service ratios compared with similarly rated countries. Foreign exchange reserve buffers also remain modest, particularly as external debt-service requirements are expected to increase over the next five years.