Sri Lanka debt default has begun

Sri Lanka is about to default on its debts, two of the world's largest credit rating agencies have warned.

Fitch Ratings lowered its assessment of the South Asian nation, saying "a sovereign default process has begun".

S&P Global Ratings made a similar announcement and said that a default is now a "virtual certainty".

This week, Sri Lanka said it will temporarily default on its foreign debts as it faces its worst economic crisis in more than 70 years.

Fitch Ratings has downgraded Sri Lanka's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'C' from 'CC'. The issue ratings on foreign-currency bonds issued on international markets have also been downgraded to 'C' from 'CC'. The Long-Term Local-Currency IDR has been affirmed at 'CCC' and the Country Ceiling at 'B-'. A full list of rating actions is at the end of this rating action commentary.

S&P said Sri Lanka’s next interest payments are due on April 18 and the failure to cover them will likely result in default, as would an outright debt restructuring. Fitch said a sovereign default process has begun and will cut the country to RD once a payment is missed and the grace period has expired.  

“There are limited upside scenarios to the ratings currently,” S&P analysts Andrew Wood and Rain Yin wrote in a statement Wednesday. The company warned that it could downgrade Sri Lanka into selective default upon “confirmation that the government has missed a coupon or principal payment on commercial foreign currency debt.”

Meanwhile, faced with mass protests over major power cuts and the soaring cost of food and fuel, officials have urged Sri Lankans working abroad to send money home.

The new governor of the country's central bank appealed for donations in sterling, US dollars and euros on Wednesday.