Fitch Raises Sri Lanka's Sovereign Rating Outlook To Stable

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The outlook on Sri Lanka's long-term foreign and local currency Issuer Default Ratings was revised to stable from negative, the Fitch Ratings announced Friday. At the same time, the agency affirmed the long-term foreign and local currency IDRs and the Country Ceiling at 'B+', and the short-term IDR at 'B'.

James McCormack, Head of Asia Sovereigns at Fitch said, "The revision to Sri Lanka's Outlook reflects positive changes in sovereign credit fundamentals following the end of the 26-year civil war, the approval of a US$2.6 billion IMF agreement and the return of private sector capital inflows."

The rating agency said official foreign exchange reserves totaled US$4.3 billion at the end of September and expects it to exceed US$5 billion by year-end. Further, the current IMF programme calls for the fiscal deficit to fall to 7% of GDP this year from 7.7% of GDP in 2008. Fitch assessed the current fiscal targets to be ambitious, even after taking into account the anticipated increase in donor funding.

According to the agency, reductions in the deficit are required to bring government debt ratios more in line with Sri Lanka's rating peers. The Fitch projects Sri Lankan government debt to reach 82.7% of GDP at end-2009, compared with the 'B' median of 30.4% and the 'BB' median of 37.3%.

The outlook on Sri Lanka's long-term foreign and local currency Issuer Default Ratings was revised to stable from negative, the Fitch Ratings announced Friday. (Market News Provided by RTTNews)