Fitch Ratings says the successful formation of a government under new President Ranil Wickremesinghe is an important precondition for resolving Sri Lanka’s debt default.
In a statement, Fitch Ratings said Sri Lanka is facing many challenges at present with the country seeking financing support from the International Monetary Board and debt restructuring from private and official bilateral creditors.
It said the new President was confirmed by a large majority in Parliament, and his government has drawn in some opposition members.
Fitch Ratings noted that the development gives hope that the government will have sufficient support to negotiate and carry out difficult reforms as part of efforts to restore macroeconomic stability and debt sustainability.
It said such reforms could unlock funding support from the IMF, which is important for Sri Lanka’s emergence from default.
Meanwhile, Fitch has rated Sri Lanka’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) at ‘RD’ (Restricted Default).
Fitch said it may move Sri Lanka’s LTFC IDR out of ‘RD’ upon the sovereign’s completion of a commercial debt restructuring that we judge to have normalised the relationship with the international financial community.