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Fitch downgrades Sri Lanka’s credit rating as political crisis continues

In another blow to Colombo, Fitch Ratings became the second credit agency in two weeks to downgrade Sri Lanka’s long-term debt rating as political upheaval continues on the island.

Fitch announced on Tuesday that Sri Lanka's long-term foreign-currency issuer default rating was to be downgraded to ‘B’ from ‘B+’.

“Fitch believes the ongoing political upheaval, which has disrupted the normal functioning of parliament, exacerbates the country’s external financing risks, already challenged by the tightening of global monetary conditions amid a heavy external debt repayment schedule between 2019 and 2022,” the agency said in a statement.

See the full statement from Fitch here.

Sri Lanka’s Central Bank responded to the move by claiming that the decision was “too hasty”.

“We are of the view that actions by both rating agencies are too hasty as their decisions are based on short term political uncertainties,” said Central Bank Senior Deputy Governor Nandalal Weerasinghe. “Such uncertainties could be very short lived only for couple of weeks.”

Sri Lanka’s political crisis has continued for over a month after President Maithripala Sirisena appointed Mahinda Rajapaksa, who oversaw a military offensive that killed tens of thousands of Tamils, as prime minister. The ensuing crisis has led to widespread turmoil, with several international figures calling for talks on sanctions, the withdrawal of trade benefits and loans to Sri Lanka put on hold.