Fitch Ratings warns of low economic growth in Sri Lanka

Fitch Ratings warned of increased external financing pressures and lower economic growth in Sri Lanka this year, in a statement released last week. 

"The tragic Easter bombings in Sri Lanka will result in lower economic growth this year and could increase external financing pressures," the statement said, adding that a 5% reduction in Fitch-estimated GDP was expected with reduced tourism. 

"These pressures are mitigated by the government's continued adherence to economic policies and targets that have enabled Sri Lanka to get its IMF programme back on track."

"These challenges increase the importance of Sri Lanka's IMF programme in catalysing funding support and as a policy anchor. The IMF Executive Board completed the fifth review under the programme this week, noting that it had been successfully brought back on track after being put on hold during Sri Lanka's political crisis last year. Completion of the fifth review releases USD164 million, bringing total disbursements under the programme to USD1.2 billion. Importantly, the IMF also extended the programme by a year, to June 2020, giving more time to complete economic reforms."

"The adequacy of FX reserves and refinancing risks remain key for Sri Lanka's sovereign rating, as highlighted in our rating sensitivities. Our downgrade to 'B'/Stable from 'B+'/Stable last December reflect heightened external refinancing risks, an uncertain policy outlook, and the risk of a slowdown in fiscal consolidation due to the political crisis. Political tensions could resurface towards the end of 2019, when presidential elections are due."

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