Fitch Affirms Sri Lanka's LTIDR B+. Revised Outlook to Positive from Stable

22nd September 2010, www.dailynews.lk

Fitch Ratings yesterday affirmed Sri Lanka’s Long-term foreign and local currency Issuer Default Ratings (IDRs) at ‘B+’, and simultaneously revised the Outlook to Positive from Stable. Fitch also has affirmed Sri Lanka’s Short-term IDR at ‘B’ and Country Ceiling at ‘B+’.

The Outlook revision is in large part a reflection of Sri Lanka’s economy benefitting from the end of a war in 2009, from a more disciplined policy framework put in place under the Stand-By Arrangement (SBA) with the IMF, and from an improved external liquidity position bolstered by the IMF program.

Fitch believes these developments support the prospects for Sri Lanka to achieve sustained medium-term growth, without a resurgence in inflation or another bout of external liquidity stress (as experienced over end-2008 to early-2009). Foreign exchange reserves stood at USD5.8bn at end- July 2010, well above the low of USD1.1bn in March 2009, bolstered by USD1.0bn of IMF funds.

Sri Lanka has made headway in rebuilding and integrating the two war-torn Northern and Eastern provinces into the rest of the local economy, which is helping to boost Sri Lanka’s productive capacity, particularly in the agriculture and tourism sectors.

This is highlighted by real GDP growing 8.5 percent yoy in Q210, from a 7.1 percent yoy rise in Q110. Fitch is forecasting real GDP growth to average 7.2 percent in 2010-2012, versus an average of 5.1 percent over the last 20 years.

Related Info:
S&P Raises Sri Lanka’s Ratings. B+ for Foreign Currency Debt with a Stable Outlook