Sri Lanka economy resilient, stable: Fitch

Last Updated: Tuesday, April 30, 2013 - 17:16

Colombo: Sri Lanka's economy, which is expected to grow at 6.5 percent this year, has sustained its resilient growth performance and stable economic outlook in 2012, Fitch Ratings said today.

"Sri Lanka's ratings balance the strength of the country's resilient growth performance, healthy level of human development and strong payment record against the weaknesses of its fiscal and external balance sheets and moderate domestic savings relative to investment needs," said Hong Kong-based Fitch.

It welcomed the introduction of a series of monetary, exchange rate and fiscal measures in early 2012, which helped to reverse the deterioration in the balance of payments that took place in 2011.

Persistence with tighter monetary and fiscal policies should help improve Sri Lanka's external liquidity position.

Official foreign exchange reserves, excluding gold, rebounded to USD 6.9 billion at end-January 2013.

This is up from a recent low of USD 5.5 billion in end-February 2012.

Sri Lanka's external debt refinancing schedule, however, remains quite heavy as an average of USD 1.9 billion per annum in sovereign debt is projected to mature from 2013 to 2015.

"This may not only limit Sri Lanka's ability to rebuild foreign exchange reserves to a much higher level, but it also means that the country's external finances will remain vulnerable to any spike in global risk aversion", Fitch however warns.

The economy has been resilient as real GDP grew 6.4 percent in 2012 versus 8.2 percent in 2011.

Fitch projects real GDP growth to average 6.5 percent-7 percent in 2013 and 2014, compared with the government's forecasts of 7.5 percent and 8 percent in 2013 and 2014 respectively.

Fitch believes the government's forecasted growth could once again lead to overheating risks.

Consumer price inflation has fallen of late, rising 7.5 percent year-on-year in March, down from an average of 9.8 percent in January and February.

Fitch assumes that the availability of concessional financing by international donors/lenders will remain a continuing feature of the government's financing programme.


First Published: Tuesday, April 30, 2013 - 17:16
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