COLOMBO, Nov. 11 (Xinhua) -- Shortfalls in implementing planned investment spending could weaken Sri Lanka's economic growth potential, making longer-term fiscal consolidation more challenging, Fitch Ratings said on Tuesday in a statement.
Fitch added that the Sri Lankan government's latest budget indicated that the authorities remain committed to reducing government debt-to-GDP ratio over the medium term after beating their targets in the 2025 budget. It said sustained strong revenue performance will remain key to meeting the government's fiscal goals.
The official budget deficit projection for 2026 is wider than the 4.6 percent of GDP that Fitch anticipated when it affirmed Sri Lanka's rating at "CCC+" in October 2025, and the primary surplus is marginally lower. However, the effect on Sri Lanka's debt trajectory could be more than offset by the over-performance in 2025, Fitch said.
The outperformance in 2025 was partly driven by underspending, with the public investment-to-GDP ratio at 3.2 percent, significantly below the target of 4 percent. Shortfalls in implementing planned investment spending could weaken the economy's growth potential, making longer-term fiscal consolidation more challenging, said the agency.
Sri Lanka's high government debt remains a key weakness in its sovereign credit profile. In its October assessment, Fitch projected that gross general government debt-to-GDP ratio would fall to about 96 percent in 2027, from 100.5 percent in 2024, remaining well above the median of 74 percent for sovereigns in the "CCC" rating category. ■