Fitch Ratings has downgraded Sri Lanka’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘C’ from ‘CC’ following the Government’s decision to suspend debt servicing of several categories of its external debts last week amidst deepening forex crisis and pending IMF bailout package.
The downgrade of Sri Lanka’s Long-Term Foreign-Currency IDR reflects Fitch’s view that a sovereign default process has begun. This reflects the announcement by the Ministry of Finance on 12 April 2022 that it has suspended normal debt servicing of several categories of its external debts, including bonds issued in the international capital markets and foreign currency-denominated loan agreements or credit facilities with commercial banks or institutional lenders.
“We will downgrade the LT FC IDR to ‘RD’ once payment on an issuance is missed and the grace period has expired,” Fitch Rating said.
The issue ratings on foreign-currency bonds issued on international markets have also been downgraded to ‘C’ from ‘CC’. The Long-Term Local-Currency IDR has been affirmed at ‘CCC’ and the Country Ceiling at ‘B-‘. A full list of rating actions is at the end of this rating action commentary.