Fitch Ratings has affirmed Sri Lanka’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘CCC+’, noting that despite the completion of the country’s debt restructuring in 2024, risks remain due to elevated government debt levels and a high interest-to-revenue ratio.
The agency highlighted that Sri Lanka’s ongoing reforms are supporting a solid economic recovery, with low inflation, substantial fiscal adjustments, and improvements in the external finance position.
“Substantial progress has been made under the 48-month IMF programme,” Fitch noted, citing the passage of the 2025 budget in line with programme targets, restoration of cost-reflective electricity pricing, improved tax compliance and revenue administration, and reforms to the Ceylon Electricity Board and other state-owned enterprises.
Fitch added that improving the investment climate, particularly in terms of foreign direct investment (FDI), will be key to bolstering Sri Lanka’s medium-term growth, though progress is likely to be incremental.
Looking ahead, Fitch said a substantial decline in the government debt-to-GDP ratio, supported by credible fiscal consolidation, stronger revenue growth, and faster economic expansion, could pave the way for a future rating upgrade.
