Fitch Ratings has flagged Sri Lanka as one of Asia-Pacific’s worst foreign-exchange reserve performers since the start of the Iran war, with the country’s gross reserves falling roughly 7% between February and April 2026.

In a report titled Stronger Credits Lead APAC Capital Flows and Deal Activity, published from Hong Kong on Friday, the ratings agency placed Sri Lanka second only to the Philippines — whose reserves shed about 8% over the same period — among the region’s major emerging markets. India and Indonesia each lost around 4%, while China and Thailand were down about 2%, EconomyNext reported.

“Some emerging markets are facing currency pressure, including India, Indonesia, the Philippines, Sri Lanka and Thailand, with depreciation in the 5%-7% range since the start of the Iran war,” Fitch wrote. “This may reflect sovereigns’ oil-import dependence and fuel buffers, as well as the perceived room for policy responses to mitigate the economic impact of the shock.”

The agency cautioned that gross reserves “only show a partial picture, however, as some authorities may have intervened heavily in the forward market” — a relevant footnote for Sri Lanka, where the CBSL has been a net dollar seller for the first time in 22 months and on Wednesday convened forex dealers on tighter market regulations.

Fitch said April emerging-market portfolio inflows totalled USD 58.3 billion, citing data from the Institute of International Finance, a sharp reversal from the USD 66.2 billion outflow recorded in March. Debt markets attracted the largest share, “but investor appetite remains diverse and shaped by issuer credit quality,” the agency said. “This matters for deal flow because sovereign quality helps shape funding conditions for their financial and non-financial corporate issuers.”

The 7% reserve drawdown corroborates an earlier media framing of the rupee as “Asia’s worst performer in May” and complements the CBSL Governor’s own regional comparison, which the Joint Apparel Association Forum has since publicly endorsed. The National Chamber of Exporters has separately warned of long-term competitiveness costs from currency volatility.

Sri Lanka’s Multi-source · 2 IMF May 27 board review is now days away, with the Fund’s Krishna Srinivasan and Peter Papageorgiou both publicly characterising the country’s macro framework as “considerably stronger than in past” episodes — language Fitch’s report effectively quantifies on the reserves side.

Source: EconomyNext.