Fitch rates Sri Lanka bond BB-

Fitch Ratings said it will assign the Democratic Socialist Republic of Sri Lanka's forthcoming debut sovereign bond a rating of BB-. This rating is in line with Sri Lanka's BB- long-term foreign-currency issuer default rating, which has a negative outlook.

Sri Lanka has a long-term issuer default ratings of BB-. The outlook is negative due to a renewed outbreak of violence between government security forces and the Liberation Tigers of Tamil Eelam, which seeks a separate state. Fitch said it judged this outbreak to be a material deterioration in domestic security with potentially adverse consequences for growth, economic stability and sovereign creditworthiness.

The ratings are underpinned by high levels of human capital development, good governance, reasonably strong institutions and a liberal economic climate, the agency said.

In the near term, however, a further deterioration in the security situation to the point where it adversely affects Sri Lanka's credit fundamentals could lead to a downgrade of the sovereign ratings, Fitch said.

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