Fitch Ratings has upgraded Sri Lanka’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘B-’ from ‘CCC+’, with a Stable Outlook, according to its latest rating action issued on 22 September 2026.
Commenting on the rating upgrade, Labour Minister and Deputy Minister of Finance and Planning Dr. Anil Jayantha said the decision reflects the progress achieved in Sri Lanka’s economy over the past two years, citing factors outlined by Fitch Ratings.
A key factor has been the improvement in the Government’s revenue collection capacity. Government revenue reached 16.7% of GDP in 2025, exceeding the International Monetary Fund (IMF) target of 15.3% of GDP. The stronger revenue performance also contributed to a primary surplus of 5.4% of GDP in 2025, surpassing the 2.3% target.
Dr. Jayantha said these developments have reduced the Government’s borrowing requirements while strengthening its capacity to service existing debt.
He also highlighted the economy’s ability to withstand external shocks. According to the Minister, Sri Lanka continued to demonstrate its capacity to maintain revenue collection despite challenges including the Ditwah cyclone disaster and geopolitical tensions in the Middle East.
The strength of the country’s external sector has also been an important consideration in debt repayment capacity. Export earnings, tourism revenue and workers’ remittances have contributed to the accumulation of foreign exchange, while Sri Lanka has continued to build its foreign reserves despite external pressures.
Fitch’s rating definitions classify ‘B’ as a highly speculative rating, indicating that material default risk remains, although a limited margin of safety exists.
