Fitch: Sri Lanka's Sovereign Rating Resilient Amid Global Energy Shock 📈

• Overall Assessment: Fitch Ratings expects no "severe downside pressure" on Sri Lanka’s sovereign credit rating despite the Middle East conflict. While the energy shock may blunt recent improvements in credit metrics, the country is in a stronger position than in 2022 to manage volatility. • Key Economic Buffers: • External Sector: A shift from a wide deficit in 2022 to a current account surplus in 2025 provides a cushion against rising oil prices. • Reserves: Improving foreign exchange reserves through 2026 act as a vital rating buffer. • Fiscal Discipline: Significant fiscal deterioration is not expected, as the IMF program limits fiscal slippage, though it also constrains policy flexibility. • Risk Factors & Pressure Points: • Energy: High oil prices threaten the trade balance. • Remittances & Tourism: Prolonged regional instability could disrupt inflows from the Gulf and dampen tourism recovery. • Debt: Government debt remains a key weakness, projected to fall to 96% of GDP by 2027 from 100.5% in 2024 (still above the 74% peer median). • Growth & Infrastructure: Gains are supported by a Rs. 342 Bn allocation for road development, ICT/digital infrastructure tax incentives, and the expansion of Colombo’s international airport. • Current Rating: Affirmed at CCC+ in October 2025 following the upgrade from Restricted Default in late 2024.