Fitch Downgrades Sri Lanka's Sovereign Credit Rating by One Notch... "Default Warning"

[Asia Economy Reporter Ji Yeon-jin] International credit rating agency Fitch downgraded Sri Lanka's sovereign credit rating by one notch, warning of the risk of default.

According to foreign media on the 18th, Fitch lowered Sri Lanka's credit rating from CCC to CC, citing growing concerns over a 'sovereign default' as Sri Lanka fails to repay $26 billion in external debt (approximately 30.8 trillion KRW).

This move came a day after the announcement that Sri Lanka's economy, which grew 12.3% in the second quarter, contracted by 1.5% in the third quarter due to the resurgence of COVID-19.

Sri Lanka's foreign exchange reserves have decreased from $7.5 billion (8.9 trillion KRW) two years ago to $1.58 billion (approximately 1.9 trillion KRW) as of the end of last month. Fitch stated, "In the absence of new external financing sources, the Sri Lankan government is likely to struggle to meet its external debt obligations in 2022?2023."

According to Fitch, Sri Lanka has government-issued bonds maturing internationally amounting to $500 million (about 600 billion KRW) in January next year and $1 billion (about 1.2 trillion KRW) in July next year. Additionally, the total principal and interest on external debt due next year is $6.9 billion (about 8.2 trillion KRW), which is approximately 4.3 times the foreign exchange reserves as of the end of last month.

The Central Bank of Sri Lanka responded to Fitch, calling it a "reckless action" and stating, "The Sri Lankan government clearly guarantees that it will meet all future debt obligations."

This content was produced with the assistance of AI translation services.