Fitch Ratings has affirmed Sri Lanka a stable outlook acknowledging the stabilization of the overall economy of the country over the past year following the introduction of a series of monetary, exchange rate and fiscal measures in early 2012.
Fitch Ratings today affirmed Sri Lanka's Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'BB-'. The Outlooks on the ratings are Stable.
The agency has also affirmed the Country Ceiling at 'BB-' and the Short-Term Foreign-Currency IDR at 'B'.
In releasing its rating on Sri Lanka Fitch ratings said persistence with tighter monetary and fiscal policies should help improve Sri Lanka's external liquidity position.
According to Fitch Ratings the tight monetary policies introduced in 2012 helped to reverse the deterioration in the balance of payments that took place in 2011.
The affirmation of Sri Lanka's sovereign ratings balanced the strength of the country's resilient growth performance, healthy level of human development and strong payment record against the weaknesses of its fiscal and external balance sheets and moderate domestic savings relative to investment needs.
Although the current account deficit fell short of the authorities' original target of 3.8% of GDP, it narrowed to 6.6% in 2012 from 7.8% in 2011, the rating agency noted.
Fitch projects that the current account deficit should decline further to about 5.2% in 2013 and 4.5% in 2014 due to a combination of stronger global growth and lower oil imports.
In releasing its rating on Sri Lanka Fitch assumed that there were will be no sustained rise in commodity prices, particularly in crude oil, in line with the agency's Global Economic Outlook.
It also assumed that the political landscape will remain stable and there will be no renewal in the civil conflict that previously lasted 26 years and ended in 2009 and that the availability of concessional financing by international donors/lenders will remain a continuing feature of the government's financing programme.