The rating agency revised Sri Lanka’s growth forecast for 2021 from 3.8% to 3.3% due to a rise in coronavirus cases in July-August.
Singapore-based Fitch Ratings said on Tuesday that the crisis-ridden Sri Lankan economy faces substantial credit risk with default “a real possibility”.
The rating agency revised Sri Lanka’s growth forecast for 2021 from 3.8% to 3.3% due to a rise in coronavirus cases in July-August.
Fitch said, “Sri Lanka’s public and external financial position remains critical, as reflected in our ‘CCC’ rating from November 2020 and confirmed in June 2021. A rating default at this level is ‘an actual’. With ‘probability’ indicates substantial credit risk.”
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The island nation’s external liquidity position remains tense with $26 billion in sovereign foreign exchange obligations due between now and 2026.
Going forward, Fitch forecasts to reduce the country’s foreign exchange reserves to $2.5 billion by 2023, down from $3.5 billion in August 2021, following a grant of $780 million through the International Monetary Fund’s special drawing rights.
For the remainder of 2021, most foreign currency loan repayments consist of project and syndicated loans.
Sovereign bond repayments of $500 million and $1 billion in January and July 2022, respectively.
Referring to the six-monthly road map published in October by the Central Bank of Sri Lanka, Fitch says that although officials have outlined plans to secure funds through bilateral, multilateral and other syndicated loans, financing plans include Limited details are included, including sources and timelines of funding.
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