Fitch Ratings upgrades Sri Lanka's rating from 'CCC+' to 'B-'

International credit rating agency Fitch has upgraded Sri Lanka's long-term foreign currency issuer default rating (IDR) from 'CCC+' to 'B-', and its outlook has been maintained at 'Stable'. This rating is based on policy actions and structural reforms that have eased external financing risks.

Fitch states that successful implementation of macroeconomic stabilization policies and structural reforms has built some resilience in the economy against external shocks. However, the agency warns that the still high level of public debt, debt servicing ratios, and limited foreign exchange reserves continue to pose a constraint on Sri Lanka's credit profile.

Sri Lanka, which imports all its fuel requirements, is also severely impacted by rising energy prices amidst the US-Iran crisis, and this is expected to lead the current account into a deficit in 2026 after three years of surplus. However, continuously growing foreign remittances help to mitigate this pressure to some extent.

Despite these challenges, Fitch points out that Sri Lanka's economic growth remains stable and further notes that financial assistance from the International Monetary Fund (IMF) and other multilateral institutions provides continuous external support to alleviate short-term pressures on the current account.