Fitch Downgrades Sri Lanka To ‘CC’ Due To Higher Debt Default Risk

COLOMBO, Dec. 18 (Reuters) – Fitch Ratings downgraded Sri Lanka’s sovereign rating from “CC” to “CC” on Saturday, citing a growing risk of default in 2022, despite repeated assurances from the central bank that measures will be taken to meet all refunds.

The rating agency said the downgrade was due to Sri Lanka’s worsening external liquidity position, underscored by declining foreign exchange reserves, in the face of high external debt payments and limited financing inflows. .

Sri Lanka has foreign currency debt service payments of $ 6.9 billion in 2022, equivalent to nearly 430% of official gross international reserves in November 2021, Fitch said in a press release.

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The cumulative service of foreign currency debt stands at around $ 26 billion from 2022 to 2026, he added.

“We believe that it will be difficult for the government to meet its external debt obligations in 2022 and 2023 in the absence of new sources of external financing,” Fitch said.

Sri Lanka’s central bank challenged Fitch’s decision, calling it “reckless”.

He said adequate steps, including negotiating multiple exchanges with India and other “friendly countries”, were nearing completion and reserves would be over $ 3 billion by the end. from 2021.

The central bank also said it would “imminently” pull a $ 1.5 billion Chinese renminbi swap to help build reserves.

“It should also be noted that the government has given a clear assurance that Sri Lanka will honor all debt obligations in the coming period, and Sri Lanka has not delayed a single payment even under severe stress. related to COVID-19 in the past two years, “the central bank said in a statement.

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Reporting by Uditha Jayasinghe Editing by Rupam Jain and Mark Potter

Our Standards: Thomson Reuters Trust Principles.

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