Sri Lanka remains vulnerable to global energy price shocks, although the country is now in a stronger position to manage the impact compared to its 2022 economic crisis, a senior Fitch Ratings official said.
Speaking at the Fitch Ratings APAC Sovereign Update 2026 virtual forum, Senior Director for Asia-Pacific Sovereign Ratings Jeremy Zook noted that rising energy prices are more likely to slow recent improvements in Sri Lanka’s credit profile rather than trigger a severe downgrade.
“Sri Lanka is quite vulnerable to energy price shocks. However, we see this more as blunting some of the positive improvements in credit metrics over the past few years, rather than leading to severe downside pressures on the rating,” Zook said.
He cautioned, however, that the extent of the impact would largely depend on how long the current energy price surge persists.
Sri Lanka’s economic resilience has improved since its 2022 crisis, when a spike in global energy prices contributed to severe external and domestic financial pressures. Reflecting this recovery, Fitch upgraded the country’s sovereign credit rating from ‘Restricted Default’ in April 2022 to ‘CCC+’ in December 2024, a rating it reaffirmed in October 2025.
Zook highlighted that the government’s macroeconomic reforms and focus on stability have strengthened the country’s position.
“Reflecting on those hard-fought gains and the Government’s focus on macro adjustment, Sri Lanka is in a stronger position now than it was in 2022 to manage this potential energy shock,” he said.
Sri Lanka recorded a current account surplus last year, a significant turnaround from the wide deficit seen during the crisis. However, higher oil prices are expected to put renewed pressure on external balances.
The impact is likely to be felt across key sectors, including trade, remittances, and tourism. Rising oil costs could widen the trade deficit, while economic disruptions in Gulf countries may affect remittance inflows from Sri Lankan workers. Tourism, a vital source of foreign exchange, could also face headwinds.
Despite these risks, Zook noted that the improved current account position provides some buffer against external shocks.
On the fiscal front, he warned that the Government’s ability to respond remains constrained under the ongoing International Monetary Fund (IMF)-supported programme.
“We’ll have to see how negotiations with the IMF proceed. If this energy shock is prolonged, there may be greater flexibility,” he said.
While uncertainties remain, Fitch’s assessment suggests that Sri Lanka’s strengthened economic foundation could help cushion the impact of global energy volatility, provided the shock does not persist for an extended period.
