Sri Lanka's debt restructuring plan reduces funding and liquidity risk: Fitch

COLOMBO, July 7 (Xinhua) -- Sri Lanka's proposed government debt restructuring plan reduces funding and liquidity risk for non-bank financial institutions (NBFIs), Fitch Ratings said in a press release on Friday.

Fitch said that Sri Lankan government's debt restructuring plan avoids direct impact on the local-currency government debt holdings of NBFIs and commercial banks, easing uncertainty over the entities' capital, funding, and liquidity profiles.

Nonetheless, the proposal is only one aspect of the sovereign's debt sustainability plan, and the weak economic environment continues to pose downside risk to the sector, Fitch said.

On Wednesday, Fitch downgraded Sri Lanka's Long-Term Local-Currency (LTLC) Issuer Default Rating (IDR) to "C" from "CC".

Fitch said on Tuesday that the Sri Lankan government's domestic debt restructuring proposal was a significant step in resolving uncertainties in the local banking sector.

Sri Lanka's parliament approved the government's domestic debt restructuring plan on July 1.