Sri Lanka vulnerable to drop in capital inflows: Fitch

Aug 10, 2013 (LBO) – Sri Lanka was vulnerable to a drop in global capital inflows having two ‘red indicators’ related to external financing, Fitch Ratings said in a report amid global bond and forex market volatility. Government debt maturities in 2013 as a share of gross domestic product was 16.8 percent for Sri Lanka, only worse than Egypt (28.0-pct), Lebanon (20.9-pct), and Hungary (17.8-pct) the other three countries that were red flagged on the indicator.

Sri Lanka has a speculative BB- rating three levels below investment grade with a stable outlook from Fitch.

Other countries that had two red indicators were China (related to banking sector), Indonesia, Poland and Egypt had red flags over public finances and the Dominical Republic had a red flags over external finances along with Sri Lanka.

Hungary, Jamaica, Lebanon, Mongolia, Turkey and Ukraine had three red indicators.

Fitch said policy tightening by the Federal Reserve was risky to emerging markets with large external financing needs made up of current account deficit and external debt, high leverage and foreign currency short term external creditors.

Most at risk were those that had recently seen strong inflows of hot money and bank