Fitch affirms Sri Lanka at 'CCC+'

Reserves forecast to reach $ 6.4 b by end-2025 GDP growth projected at 4.4% in 2025, easing to 3.8% in 2026 and 3.6% in 2027 Primary surpluses expected to average 2.7% of GDP during 2025-2027 Govt. debt/GDP ratio forecast at 96% in 2027, with interest/revenue falling to 46.5% Macro-Linked Bonds: first GDP threshold expected to trigger by 2028, raising principal and coupon payments Debt sustainability hinging on maintaining primary surpluses and 3.5% growth

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FITCH Ratings yesterday affirmed Sri Lanka's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'CCC+'.

Fitch typically does not assign Outlooks to sovereigns with a rating of 'CCC+' or below.

The ratings agency said Sri Lanka's 'CCC+'sovereign rating remains constrained by elevated general Government indebtedness and a high interest-revenue ratio despite the completion of the sovereign's debt restructuring in 2024.

"Sustained adherence to a path of reforms is facilitating a solid economic recovery, low inflation, a substantial fiscal adjustment, and improvements in the external finance position," Fitch said in a statement yesterday It noted substantial progress Sri Lanka has made under the 48-month IMF program.

Momentum includes passage of the 2025 budget in March in line with program targets, and restoration of cost-recovery pricing for electricity. Additional measures include greater tax compliance and revenue administration, and reforms to the Ceylon Electricity Board and state-owned enterprises. The investment climate, particularly FDI, is likely to remain a priority to bolster medium-term growth, albeit with incremental progress, Fitch noted.

The Central Bank of Sri Lanka (CBSL) continues to refrain from monetary financing of the deficit, and exchange-rate flexibility has been maintained. Debt-management functions carried out by CBSL are gradually being taken over by the Public Debt Management Office (PDMO).Full operationalisation of the PDMO is expected by January 2026.