Fitch Upgrades Sri Lanka’s Credit Rating to B-

Picture Credit: by Adaderana Biz English

Sri Lanka has received a boost to its economic recovery efforts after Fitch Ratings upgraded the country's Long-Term Issuer Default Ratings from CCC+ to B-, assigning a Stable Outlook on September 22, 2026.

The upgrade reflects improvements in fiscal management, external financing conditions and the implementation of structural reforms. According to Fitch, stronger government revenue, improved fiscal balances and a gradual rebuilding of foreign exchange reserves have helped reduce the country's vulnerability to economic shocks.

Fitch expects Sri Lanka to record a primary fiscal surplus of 2.6% of GDP in 2026, following a record 5.4% surplus in 2025. Government debt is projected to decline from 96.7% of GDP in 2025 to 92.9% in 2026, supported by continued fiscal discipline and revenue mobilisation.

However, significant challenges remain. Rising global energy prices, driven by the US-Iran conflict, have increased Sri Lanka's import costs and placed pressure on its external accounts. Fitch forecasts a current account deficit of 1.2% of GDP in 2026, reversing the surpluses recorded over the previous three years.

Despite these pressures, the agency expects Sri Lanka's economy to grow by 4.1% in 2026, while foreign exchange reserves are projected to reach $7.7 billion by year-end. Continued financial assistance from the International Monetary Fund and other multilateral institutions is expected to support external financing and economic stability.

Nevertheless, Sri Lanka's relatively high debt burden, limited foreign exchange buffers and increasing external debt repayments remain important concerns.

Picture Credit: by Themorning

The rating upgrade marks another development in Sri Lanka's recovery following its economic crisis and debt restructuring. However, Fitch emphasises that maintaining fiscal discipline, strengthening foreign exchange reserves and sustaining structural reforms will remain essential to improving the country's creditworthiness over the coming years.