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Fitch downgrades SL’s Long-Term Local-Currency IDR to ‘RD’

Published

2 years ago

2023/09/16

Global rating agency, Fitch, in its latest report downgraded Sri Lanka’s Long-Term Local-Currency (LTLFC) Issuer Default Rating (IDR) to ‘RD’ (Restricted Default) from ‘C’.

In a press release Fitch said the ratings on its local-currency bonds tendered in the domestic debt exchange have been downgraded to ‘D’ from ‘C’ while its other four local-currency bonds not tendered in the domestic debt exchange have been affirmed at ‘C’.

The Long-Term Foreign-Currency (LTFC) IDR has been affirmed at ‘RD’, and the ratings on Sri Lanka’s foreign-currency bonds have been affirmed at ‘D,’ Fitch said.

Given that Fitch typically does not assign outlooks to sovereigns with a rating of ‘CCC+’ or below, all issue ratings have subsequently been withdrawn, the press release said.

“Fitch has withdrawn the issue ratings of Sri Lanka’s foreign and local-currency bonds as these are no longer considered to be relevant to the agency’s coverage,” Fitch said.

Given below is the press release in full: “Distressed Debt Exchange: The downgrade of Sri Lanka’s LTLC IDR reflects the partial completion of an exchange of Sri Lanka’s T-bonds on 14 September as part of a broader domestic debt optimisation (DDO) launched in July 2023. The DDO also includes conversion of T-bills held by the Central Bank of Sri Lanka (CBSL) into treasury bonds (T-bonds), which has not yet been completed.

“In Fitch’s view, the exchange of T-bonds constitutes a distressed debt exchange (DDE) under the agency’s criteria, given that the maturity extension of the tendered bonds represents a material reduction in terms versus the original contractual terms, and given that the exchange is needed to avoid a traditional payment default.

“Reduction in Terms: Eligible bonds for which tenders were received and accepted have been exchanged into 12 new instruments of equal size and the same aggregate principal amount, maturing between 2027 and 2038. Accepted tenders reached about 37% of the outstanding principal amount of eligible bonds outstanding as of 28 June 2023. Accepted tenders were predominantly by superannuation funds, which will face higher tax rates on income from T-bonds if they did not meet a participation threshold.

“Local-Currency Debt Service Continuing: Fitch believes that Sri Lanka has continued to service the T-bonds throughout the DDO process, and that T-bonds not tendered in the exchange will continue to be serviced as per their original terms, including but not limited to the entirety of the 12 series of T-bonds (out of 61 eligible series) for which no valid tenders were received. Four of these 12 series were rated by Fitch and were affirmed at ‘C’ prior to withdrawal.

“Local-Currency Restructuring Incomplete: Under Fitch’s rating criteria, the LTLC IDR will remain in ‘RD’ until the debt exchange is completed in its entirety. Fitch deems the process incomplete, as the exchange of T-bills held by CBSL is still pending. Fitch regards the T-bills as public debt securities, and they are also held by private investors.

“Foreign-Currency IDR in Default: The sovereign remains in default on foreign-currency obligations and has initiated a debt restructuring with official and private external creditors. The Ministry of Finance had issued a statement on 12 April 2022 that it had suspended normal debt servicing of several categories of external debt, including bonds issued in international capital markets, foreign currency-denominated loans and credit facilities with commercial banks and institutional lenders.

“ESG – Governance: Sri Lanka has an ESG Relevance Score of ‘5’ for Political Stability and Rights as well as for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in our proprietary Sovereign Rating Model (SRM). Sri Lanka has a medium WBGI ranking in the 45th percentile, reflecting a recent record of peaceful political transitions, a moderate level of rights for participation in the political process, moderate institutional capacity, established rule of law and a moderate level of corruption.

“ESG – Creditor Rights: Sri Lanka has an ESG Relevance Score of ‘5’ for Creditor Rights, as willingness to service and repay debt is highly relevant to the rating and is a key rating driver with a high weight. The affirmation of Sri Lanka’s LTFC IDR at ‘RD’ and downgrade of LTLC IDR to ‘RD’ reflect a default event.

“The Country Ceiling for Sri Lanka is ‘B-‘. For sovereigns rated ‘CCC+’ or below, Fitch assumes a starting point of ‘CCC+’ for determining the Country Ceiling. Fitch’s Country Ceiling Model produced a starting point uplift of zero notches. Fitch’s rating committee applied a +1 notch qualitative adjustment to this, under the balance of payments restrictions pillar, reflecting that the private sector has not been prevented or significantly impeded from converting local currency into foreign currency and transferring the proceeds to non-resident creditors to service debt payments.

Fitch does not assign Country Ceilings below ‘CCC+’, and only assigns a Country Ceiling of ‘CCC+’ in the event that transfer and convertibility risk has materialised and is affecting the vast majority of economic sectors and asset classes.”

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Prime Minister Attends the 40th Anniversary of the Sri Lanka Nippon Educational and Cultural Centre

Published

33 mins ago

2026/02/23

Priyan

Prime Minister Dr. Harini Amarasuriya attended the special ceremony marking the 40th anniversary of the Sri Lanka Nippon Educational and Cultural Centre (SNECC), along with the 75th birthday of its Secretary General, the Chief Incumbent of Sri Mahindaramaya, Ethul Kotte, the Chief Sangha Nayake of the Western Province, and scholar Ven. Meegahathenna Chandrasiri Thero.

The primary objective of the event was to appreciate the service rendered by the Sri Lanka Nippon Educational and Cultural Centre, which has functioned as a bridge between Japan and Sri Lanka since 1986, contributing significantly to the development and welfare of children in Sri Lanka.

Addressing the gathering, the Prime Minister stated that the social service carried out by Ven. Meegahathenna Chandrasiri Thero through the Nippon Centre, aimed at fulfilling the educational aspirations of Sri Lankan children, is highly commendable. She further emphasized that the Centre’s contribution to nurturing skilled children into disciplined and responsible citizens, as well as strengthening cultural ties between the two countries, is appreciated by the Government.

Over the past four decades, thousands of students have benefited from the “Nippon Scholarship” programme implemented by the Centre. In addition to providing school supplies, monthly financial assistance, medical support, and spectacles, the programme offers Japanese language education and guidance for employment and training opportunities in Japan for Sri Lankan youth. Annual study tours to Japan and collaborative programmes organized to enhance mutual understanding between students of the two countries were also highlighted at the event.

Marking this special occasion, the Prime Minister extended her best wishes to Ven. Meegahathenna Chandrasiri Thero on his 75th birthday and wished him continued strength to successfully carry forward this invaluable service.

The event was attended by the Mayor of Kotte, Arosha Atapattu, representatives of sponsoring organizations from Japan, scholarship recipients, and other distinguished guests.

[Prime Minister’s Media Division]

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Navy’s latest addition P 628 sails for Colombo from Baltimore

Published

48 mins ago

2026/02/23

Priyan

The Offshore Patrol Vessel P 628, which was formally handed over to the Sri Lanka Navy by the U.S. Coast Guard in December 2025, departed for Sri Lanka from Baltimore, United States on 20th February 2026. The home bound journey began, after the modernization work of the ship to suit the operational needs of the Sri Lanka Navy.

The EX-United States Coast Guard Cutter, USCGC Decisive was officially handed over to the Sri Lanka Navy on 02 Dec 25, as the latest addition to the SLN fleet under the Pennant Number P 628. Upon her arrival in Sri Lanka, the ship is scheduled to be formally commissioned into the fleet.

Measuring 64 metres in length, this ‘B-Type Reliance Class 210-foot Cutter’ is equipped with advanced technological systems and facilities, capable of conducting extensive surveillance operations spanning up to 6,000 nautical miles per patrol.

The vessel’s voyage to Colombo is historic, possibly marking the longest-ever passage undertaken by a Sri Lanka Navy ship. Covering approximately 14,775 nautical miles, the journey will see the P 628 navigate from Baltimore through the Atlantic Ocean, the Panama Canal (a first for a Sri Lankan naval vessel), the Pacific Ocean, and into the Indian Ocean via the Straits of Malacca. The ship is expected to arrive in Sri Lanka during the first week of May 2026.

During the transit, the P 628 is scheduled to make port calls to replenish supplies and services, providing opportunities to further strengthen diplomatic ties with partner nations.

This transfer represents the fourth vessel provided to the Sri Lanka Navy by the United States Coast Guard, reinforcing a long-standing partnership aimed at addressing common maritime challenges.

News

Commander of the Navy attends International Fleet Review

Published

1 hour ago

2026/02/23

Priyan

The 13th edition of the multilateral naval exercise MILAN hosted by the Indian Navy, is being held from 18 to 26 Feb 26, at Visakhapatnam and in the waters of the Bay of Bengal.

SLNS Sagara and Nandimithra represented the Sri Lanka Navy by participating in the International Fleet Review (IFR), a major component of this multilateral naval exercise, held on 18 Feb.

The event was attended by the Commander of the Sri Lanka Navy, Vice Admiral Kanchana Banagoda, at the invitation of the Chief of the Naval Staff of India, Admiral Dinesh K Tripathi. The President of India reviewed the IFR, participated by the warships representing regional and global navies.

Held under the theme “United Through Oceans and the spirit of Camaraderie Cohesion Collaboration,” IFR and MILAN-26 provide a vital platform for participating nations. The participation of the Sri Lanka Navy in the MILAN-26 multilateral naval exercise highlighted Sri Lanka’s commitment to advancing its maritime interests and addressing shared challenges through enhanced cooperation with other nations and institutions, grounded in mutual understanding.

Furthermore, participation in endeavours of this nature will strengthen mutual cooperation and interoperability with other maritime stakeholders. It will also provide the Sri Lanka Navy with valuable opportunities to gain new knowledge, strategic acumen, and operational experience, key elements in fostering a collective approach to maritime security.

During this visit, the Navy Commander engaged in bilateral discussions with regional and extra-regional diplomatic representatives and these strategic-level talks focused on matters of mutual interest pertaining to Sri Lanka’s maritime security and stability.