Business

Fitch downgrades Sri Lanka’s long-term foreign-currency IDR to ‘CC’

Published

5 years ago

2021/12/20

Fitch Ratings has downgraded Sri Lanka’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CC’, from ‘CCC’. Fitch typically does not assign Outlooks or apply modifiers for sovereigns with a rating of ‘CCC’ or below.

A number of rating actions are as follows.

The downgrade reflects our view of an increased probability of a default event in coming months in light of Sri Lanka’s worsening external liquidity position, underscored by a drop in foreign-exchange reserves set against high external debt payments and limited financing inflows. The severity of financial stress is illustrated by elevated government-bond yields and downward pressure on the currency.

We have affirmed the Long-Term Local-Currency IDR at ‘CCC’, as authorities have continued access to domestic financing, despite high and still-rising government debt and an elevated debt service burden.

Sri Lanka’s foreign-exchange reserves have declined much faster than we expected at our last review, owing to a combination of a higher import bill and foreign-currency intervention by the Central Bank of Sri Lanka. Foreign exchange reserves have declined by about USD2 billion since August, falling to USD1.6 billion at end-November, equivalent to less than one month of current external payments (CXP). This represents a drop in foreign-currency reserves of about USD 4 billion since end-2020.

We believe it will be difficult for the government to meet its external debt obligations in 2022 and 2023 in the absence of new external financing sources. Obligations include two international sovereign bonds of USD500 million due in January 2022 and USD1 billion due in July 2022. The government also faces foreign-currency debt service payments, including principal and interest, of USD6.9 billion in 2022, equivalent to nearly 430% of official gross international reserves as of November 2021. Cumulative foreign-currency debt service, including interest and principal, amounts to about USD26 billion from 2022 through to 2026.

The timing and availability of external resources is unclear and may not be readily available for debt service. The central bank published a six-month roadmap in October that outlined plans to raise additional external borrowings through a number of channels, including bilateral and multilateral sources, syndicated loans and through the monetisation of under-utilised assets in 1Q22.

A drawdown on the existing currency swap facility with the People’s Bank of China (PBOC) could boost reserves by up to CNY10 billion (USD1.5 billion equivalent). However, even with resources from the swap facility, foreign exchange reserves are likely to remain under pressure, in our view. Additional sources of financing could come from an economic support package from India, which contains a swap facility under the South Asian Association for Regional Cooperation currency framework of USD400 million, a swap facility with the Qatar Central Bank, remittances securitisation and a revolving credit facility with the Bank of China Limited (A/Stable). However, even if all these sources are secured, we believe it will be challenging for the government to maintain sufficient external liquidity to allow for uninterrupted debt servicing in 2022.

Press reports suggest the government may be contemplating IMF financing; an IMF programme would unlock multilateral financing, but we believe the Fund could well suggest restructuring to bring about debt sustainability.

Sri Lanka’s external finances are further challenged by a persistent current account deficit, resulting in downward pressure on the exchange rate. We estimate that the deficit widened to about 5.7% of GDP in 2021 and expect it to remain at about 4.0% in 2022, before falling to 2.1% by 2023. A plunge in remittances, a weak tourism recovery and rising imports have contributed to the wider current account deficit. Travel and tourism, an important economic driver, has been hit hard by the COVID-19 pandemic and the outlook for a recovery remains uncertain given the emergence of new highly transmissible virus variants.

The Sri Lankan rupee/US dollar spot exchange rate depreciated by 7%-8% since end-2020, and the central bank intervened to support the currency, exacerbating the decline in reserves.

Wide fiscal deficits continue to worsen the outlook for debt sustainability. The 2021 fiscal deficit target of 8.9% of GDP was missed by a wide margin, and we expect the government deficit to widen to about 11.5% of GDP in 2022. We believe 2022 revenue targets are optimistic, especially in light of our expectation of weak economic activity. We forecast general government debt to reach about 110% of GDP by 2022, and to keep rising under our baseline, absent major fiscal consolidation.

We also believe it is unlikely that Sri Lanka will meet its 2025 government debt reduction target of about 89% of GDP or narrow the fiscal deficit to 4.8% of GDP. Rising interest payments are a major driver of the widening deficit and the interest/revenue ratio of at about 95.0% is well above the peer median of 11.3%.

Sri Lanka’s economic performance is likely to weaken in 2022, as the challenging external position and exchange-rate pressure will have knock-on effects on economic activity. Foreign currency shortages in 2021 hampered food and fuel imports, and continued external liquidity stress could worsen supply shortages, hurting economic activity. We expect growth to slow to 2.0% in 2022, from an estimated 3.6% in 2021, before recovering to 4.3% in 2023 partly due to base effects and a gradual easing of domestic pressures, although downside risks to our forecasts remain. Sri Lanka’s economy was expanding at a modest pace prior to the pandemic, which led real GDP to contract by 3.6% in 2020.

ESG – Governance: Sri Lanka has an ESG Relevance Score of ‘5’ for Political Stability and Rights. This reflects the high weight that the World Bank Governance Indicators (WBGI) have in our proprietary Sovereign Rating Model. Sri Lanka has a medium WBGI ranking at the 47th percentile, reflecting a recent record of peaceful political transitions and a moderate level of rights for participation in the political process. As Sri Lanka has a percentile rank below 50 for the governance indicator, this has a negative impact on the credit profile.

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Business

ComBank hands over fully refurbished wards at De Soysa Hospital for Women

Published

8 hours ago

2026/10/4

Thilina Walpola

Pictured here are the representatives of the Bank and senior officials of the hospital at the ceremonial handing over of the refurbished ward.

The Commercial Bank of Ceylon recently handed over Wards No. 03 and 04 of the De Soysa Hospital for Women, after the completion of a comprehensive renovation project launched in March this year to mark International Women’s Day.

Wards 03 and 04 handle a substantial share of the hospital’s patient load, and account for approximately 2,500 to 3,000 deliveries and 4,000 to 5,000 admissions annually. Their refurbishment was designed to significantly enhance patient care, safety and comfort, and directly benefit thousands of mothers and newborns.

Five Trustees of the Commercial Bank’s Corporate Social Responsibility Trust participated in the formal handing over of the refurbished wards to the hospital authorities. They were Sharhan Muhseen, the Bank’s Chairman, Raja Senanayake, Deputy Chairman, Sanath Manatunge, Managing Director/CEO, Hasrath Munasinghe, Chief Operating Officer, and Prasanna Indrajith, Chief Financial Officer.

Established in 1879, the De Soysa Hospital for Women is the first maternity hospital in Sri Lanka and the second oldest in Asia and is credited with, among others, performing the country’s first caesarean section in 1905 and establishing one of its earliest organised operating theatres in 1907.

The Commercial Bank’s Corporate Social Responsibility Trust, through which this project was implemented, has via its healthcare-related interventions supported more than 100 government hospitals with essential equipment and infrastructure, contributed to emergency medical services through the ‘Adopt an Ambulance’ initiative, and implemented targeted community health interventions such as water storage solutions for families affected by kidney disease.

Business

IIHS expands global nursing pathways

Published

8 hours ago

2026/10/4

Thilina Walpola

Dr. Renuka Jayatissa and Dr. Kithsiri Edirisinghe speaking to the media

The International Institute of Health Sciences (IIHS) Multiversity is expanding its international education programmes with the aim of creating overseas employment opportunities for Sri Lankan nurses and allied health professionals while contributing to foreign exchange earnings.

Speaking to the media during a conference at IIHS Multiversity in Kerawalapitiya, Dr. Kithsiri Edirisinghe, CEO, Co-Founder and Dean of IIHS aid that the institute has established academic partnerships with overseas universities and higher education institutions, including the University of Surrey in the UK, Deakin University in Australia, Metropolia University of Applied Sciences in Finland, Asia e University in Malaysia and SUNY Canton in the United States.

Under its ‘Study in Sri Lanka, Graduate to the World’ model, students can complete foundational and diploma-level qualifications locally before progressing to international top-up degrees or overseas employment.

Dr Edirisinghe said the model could substantially reduce the cost of obtaining internationally recognised qualifications. It estimates that completing a four-year bachelor’s degree at the University of Surrey in the UK would cost about USD 145,700, including tuition and living expenses, compared with about USD 27,750 through the IIHS pathway in Sri Lanka.

Dr Edirisinghe said the institute’s focus on overseas deployment addressed both Sri Lanka’s economic needs and the growing global demand for healthcare workers.

“Our winning model is producing job-ready, registration-ready healthcare professionals who can seamlessly enter foreign healthcare systems,” he said.

IIHS, which began operations in 2002 as the American College of Health Sciences, established its institutional base in Welisara in 2008 and launched its purpose-built greenfield multiversity campus in 2023.

The institute said it has upgraded the qualifications of more than 5,000 government nurses, supported over 2,500 youth on international employment pathways and trained more than 1,000 allied health professionals. It has also carried out over 250 community health projects.

The institute has identified Germany and Japan among its target markets, with pathways planned for 2,000 nurses for Germany and a one-year preparation programme linked to around 4,000 healthcare positions in Japan.

Dr. Renuka Jayatissa, Vice-Chancellor and a specialist medical doctor, said demographic changes and the growing burden of non-communicable diseases were changing healthcare requirements in Sri Lanka.

Business

Sampath Bank launches Sri Lanka’s first community-powered book discovery platform at Colombo International Book Fair

Published

8 hours ago

2026/10/4

Thilina Walpola

Sampath GPay customers can enjoy 25% cash back on Book Fair purchases

Sampath Bank PLC has launched Sampath Book Finder, Sri Lanka’s first community-powered book discovery platform, giving visitors to the Colombo International Book Fair a faster and more seamless way to find the books they are looking for across the fair’s 150+ stalls, while also opening up new opportunities to discover titles recommended by fellow readers.

Introduced on the opening day of the Colombo International Book Fair on 25 September, Sampath Book Finder brings together digital innovation and the collective knowledge of readers to address a familiar challenge at one of Sri Lanka’s largest literary gatherings, where the scale of the fair can make locating a particular title a time-consuming exercise. When a book proves difficult to locate, visitors can access bookfairtracker.com or scan the designated QR code and submit a request to the community, allowing readers who have already spotted the title to share its location and help others find it without having to search stall after stall.

Commenting on the initiative, Milinda Weerasinghe, Chief Marketing Officer, Sampath Bank PLC, said, “At Sampath Bank, we believe meaningful innovation begins by identifying everyday challenges and creating solutions that make a real difference. Sampath Book Finder brings this thinking to the Colombo International Book Fair by turning the collective knowledge of readers into a real-time digital solution, empowering them to find what they are looking for, discover something new and help others do the same, while making the overall experience more convenient and connected.”

The platform also turns book discovery into a shared experience, allowing visitors to recommend books they encounter by sharing the title, publisher, hall and stall number, which enables fellow readers to discover sought-after titles and recommendations while making it easier to locate them within the fair.

Sampath Bank’s longstanding association with the Colombo International Book Fair also continues in 2026, marking more than 20 years of partnership, with the Bank serving as the Official Banking Partner for this year’s fair. As part of its presence at the event, SampathCards offer 25% cashback for Sampath GPay customers on their purchases and 3 months 0% instalment plans for book purchases via Sampath credit cards, while visitors can also access banking services through the Bank’s physical presence at the fair. Customers registering to open selected Fixed Deposits at the premises will receive an additional 0.25%, adding further value and convenience for visitors.