Full Release (London/Hong Kong, April 23, 2007) – Fitch Ratings has affirmed the Democratic Socialist Republic of Sri Lanka’s foreign and local currency Issuer Default Ratings (“IDRs”) of ‘BB-‘ (BB minus) with a Negative Outlook. The Country Ceiling is affirmed at ‘BB-‘ (BB minus) and the Short-term foreign currency rating at ‘B’. The Outlook on Sri Lanka’s sovereign rating was revised to Negative in April 2006 in response to concerns that the deterioration in the security situation threatened to adversely affect economic performance and sovereign creditworthiness.
“The affirmation of Sri Lanka’s ‘BB-‘ (BB minus) ratings acknowledges that the feared adverse impact on the economy and sovereign creditworthiness has yet to materialise” says Paul Rawkins, Senior Director in Fitch’s sovereign team, “but Fitch still judges that the domestic security situation continues to pose risks to economic stability and growth and hence the Negative Outlook remains warranted”.
The economy is expanding at its fastest rate for more than two decades, underpinned by rising domestic and foreign investment, as well as record inflows of remittances in recent years that exceeded USD2bn in 2006 (approx. 7% of GDP).
The foreign exchange reserves of the Central Bank of Sri Lanka have also increased, to USD2.5bn, providing more than four mon