Attacks raise borrowing risks: Fitch

Thursday, 25 April 2019 00:09 - - {{hitsCtrl.values.hits}}

International rating agency says tourism earnings are also under threat

Fitch Ratings has warned that the aftermath of the Easter Sunday attacks will undermine tourism earnings and pose additional external financing risks for Sri Lanka.

The international ratings agency releasing a short update warned that Sri Lanka, which already has high levels of debt repayments till about 2022, could have higher financing risks as it seeks to raise the funds it needs to repay debt. Countries with higher economic risks are usually faced with higher interest rates when they go to raise capital from international markets.

“Heightened external financing risks are a factor in the low ratings of Sri Lanka (B), which was downgraded in December 2018 and is seeking to stabilise its external finances with IMF assistance,” Fitch Ratings said.

Fitch downgraded Sri Lanka’s rating to ‘B’ from ‘B+’ last December following last year’s political crisis.

The global rating agency said adding to that the church and hotel bombings that occurred on Easter Sunday would undermine tourism earnings, which had been rising steadily in recent years to about 5% of GDP in 2018.

Sri Lanka secured a staff-level agreement on the fifth review and extension of its International Monetary Fund (IMF) program in March.

The rating agency in its Asia-Pacific sovereign credit overview for the second quarter of 2019 said the outlooks for Asia Pacific (APAC) sovereigns remain stable, supported by strong financial buffers and flexible, proactive policy frameworks. All the region’s sovereign credits are on Stable Outlook.