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Fitch Warns of High Risk Sri Lanka May Default on Local Bonds

A worker makes his way to a wholesale market to find jobs in Colombo, Sri Lanka.

A worker makes his way to a wholesale market to find jobs in Colombo, Sri Lanka.

Photographer: Buddhika Weerasinghe/Bloomberg

Sri Lanka is contending with a high risk of default on its local currency bonds as it seeks to reduce debt, key to winning financing from the International Monetary Fund to bring relief to the crisis-hit island.

Fitch Ratings’s ‘CCC’ rating on long-term local currency debt that was affirmed in May “reflects a high risk that local-currency debt will be included in debt restructuring,” Sagarika Chandra, Hong Kong-based associate director, wrote in a statement. Sri Lanka had $30 billion of foreign debt and $34 billion of domestic debt as of the end of April.