Sri Lanka’s faster growth bucking trend: Fitch

Aug 05, 2013 (LBO) – Sri Lanka’s economy is growing faster despite a slow global recovery, but the country needs more savings and foreign direct investments to reduce borrowings, senior rating analysts at Fitch said. Andrew Colquhoun, senior director and head of Asia Pacific sovereign ratings said a global recovery was still patchy, with the outlook for US stronger but, Europe and China slowing leading to a downward revision in overall global growth.

“One country that has bucked the trend is Sri Lanka – Fitch still expects the economy to grow about 6.5 percent this year,”

“But the question is – how to fund growth? Sri Lanka’s domestic savings aren’t high enough to fund its investment needs, so there is a demand for foreign capital.

“Our concern from a credit perspective is that the capital is coming more in the form of debt than of FDI.

“Rising external debt could be vulnerability for Sri Lanka in a world that is warming up to the prospect of a ‘Fed exit’ and more expensive funding generally.”

Fitch Ratings is holding its first sovereign and banking round table in Colombo tomorrow with the country’s top financial market participants. Central Bank Governor Nivard Cabraal will be chief guest