No severe sovereign rating downside risk for SL: Fitch

Says global energy shock seen more as a blunting of positive improvements in credit metrics Significant fiscal deterioration not expected IMF program limits fiscal response; sees possibility of flexibility if shock persists Oil prices, remittances and tourism flagged as key pressure points from prolonged Mideast crisis

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FITCH Ratings yesterday said it does not expect Sri Lanka's sovereign rating to face severe downside pressure from the ongoing global energy shock linked to the escalating Middle East conflict, although it could blunt recent improvements in credit metrics.

“Sri Lanka is quite vulnerable to energy price shocks. However, we think of it perhaps more as blunting some positive improvements in credit metrics that we’ve seen over the past few years, rather than necessarily leading to severe downside pressures on the rating,” said Fitch Senior Director - APAC Sovereign Ratings Jeremy Zook.

“Of course, this all depends on how long the energy price shock persists,” he said speaking at the Fitch Ratings APAC Sovereign Update 2026 virtual forum yesterday.

In April 2022, Fitch Ratings downgraded Sri Lanka to ‘Restricted Default.’ In December 2024, Fitch Ratings upgraded Sri Lanka’s sovereign credit rating from ‘Restricted Default’ to ‘CCC+,’ which it affirmed in October 2025.

Zook pointed to the 2022 crisis as a reference point, noting that the previous surge in energy prices had significant repercussions domestically and in terms of external finances for Sri Lanka, adding that such risks remain in a severe downside scenario.