Fitch Ratings has recalibrated its Sri Lankan National Rating scale to reflect changes in the relative creditworthiness among Sri Lankan issuers, following Fitch’s downgrade of the country’s sovereign rating to ‘CCC’ from ‘B-‘ on 27 November 2020.
Fitch said that it typically does not assign outlooks or apply modifiers to sovereigns with a rating of ‘CCC’ or below.
The recalibration will result in rating actions for some issuers with Sri Lankan national ratings. These rating revisions will be announced soon.
National scale ratings are a risk ranking of issuers in a particular market designed to help local investors differentiate risk.
Sri Lanka’s national scale ratings are denoted by the unique identifier ‘(lka)’. Fitch adds this identifier to reflect the unique nature of the Sri Lankan national scale.
National scales are not comparable with Fitch’s international ratings scales or with other countries’ national rating scales.
The Government had earlier disputed the downgrading by Fitch Ratings saying it fails to recognize the robust policy framework of the new Government.
The Finance Ministry had said that it observed with disappointment the rating action by Fitch Ratings expressing concerns about Sri Lanka’s external debt repayment capacity over the medium-term, financing options and debt sustainability risks, at a time when the newly appointed Government has just announced its medium term policy framework in its Budget 2020.
The Finance Ministry noted that Fitch Ratings builds up its argument based on the ‘existing financing model’, thus adopting a backward looking approach.
The Government of Sri Lanka also reaffirmed to foreign investors that have put faith in Sri Lanka continuously over the past several years that Sri Lanka remains willing and able to meet its debt obligations, as it has done impeccably in the past. (Colombo Gazette)