Fitch rates Sri Lanka foreign currency debt, country ceiling BB-

Fitch Ratings said it assigned the Democratic Socialist Republic of Sri Lanka long-term foreign and local currency debt ratings of BB-, a B short-term foreign currency debt rating and a BB- country ceiling.

The outlook is stable.

Sri Lanka has proved resilient to adverse shocks over a long period of time, its institutions are strong and it has an unblemished debt service record, the agency said. At around 67% of current external receipts in 2004, the net present value of gross external debt was less than half its face value of 142%, a factor reflected in very low external debt service costs. Only 5% of public external debt is owed to commercial creditors and none has been raised on international capital markets.

Sri Lanka's economy has experienced negative growth only once since 1950 and GDP per capita at market exchange rates surpassed $1,000 in 2004. Fitch attributed this resilience to strong institutions, a relatively high level of human capital development and successive governments' commitment to an open, market-oriented economy.

However, the ratings are constrained by concerns about public debt sustainability, weak coalition governments that have impeded fiscal consolidation and the absence of an enduring solution to a long-running civil conflict in the Tamil-dominated areas of the island.

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