(Repeat for additional subscribers)
April 7 (The following statement was released by the rating agency)
Fitch Ratings has assigned Sri Lanka's forthcoming US dollar-denominated global bonds due
2019 an expected rating of 'BB-(EXP)'. The final rating is contingent on the receipt of final
documentation conforming to information already received. The expected rating is in line with
Sri Lanka's current Long-Term Foreign Currency Issuer Default Rating (IDR) of 'BB-' with
Stable Outlook. The sovereign's Long-Term Local Currency IDR is also 'BB-' with
KEY RATING DRIVERS
Sri Lanka's 'BB-' IDRs reflect the following key rating drivers:
- Relatively strong growth, a comparatively high level of basic human
development (as indicated by the UN's Human Development Index) and a solid
- The fiscal deficit (5.9% of GDP in 2013) and government debt burden (78.3% of
GDP in 2013) remain at relatively high levels, although the 2014 budget signals
commitment to medium-term debt reduction and an ability to maintain a gradual
fiscal consolidation trend.
- The external finances form a weakness with a persistent but narrowing current
account deficit and higher net external debt level (35.9% of GDP) compared with
peers also rated in the 'BB' category (on average, 18.9% of GDP).
A Stable Outlook reflects Fitch's assessment that upside and downside risks to
the rating are well balanced.
The main factors that individually, or collectively, could trigger negative
rating action are:
- An extended period of economic overheating accompanied by a large surge in
- A material deterioration in the public finances, which leads to a substantial
increase in Sri Lanka's general government debt-to-GDP ratio.
- Intensification in external financing risks, particularly a renewed widening
in the current account deficit combined with a fall in capital inflows.
The main factors that individually, or collectively, could trigger positive
rating action are:
- Sustained improvement in the macroeconomic outlook that is consistent with
healthy economic growth coupled with moderate and stable inflation and external
- A material improvement in Sri Lanka's public finances underpinned by a higher
government revenue-to-GDP ratio and conversely a large decline in the general
government debt-to-GDP ratio.
- Significant improvement in external finances, with smaller current account
deficits and higher levels of non-debt capital inflows (that is, foreign direct
- Sri Lanka's political landscape remains broadly stable and there is no renewal
in the civil conflict that previously lasted 26 years and ended in 2009.
- No sustained rise in commodity prices, particularly in crude oil, in line with
Fitch's Global Economic Outlook.