Sri Lanka's rating is three levels below the lowest investment grade rating of 'BBB-'. The outlook was stable.
"Official data do not point to overheating of the economy, as inflation (4.2 percent in March) and credit growth (4.4 percent in February) are low," Fitch Ratings said.
"However, average inflation over the past five years has been high (6.2 percent) and volatile compared with peers (5.0 percent median for the 'BB' peer group) and the potential for a build-up of future imbalances exists."
Fitch said authorities had a pro-growth bias with monetary policy being eased despite high official growth.
The public finances are weak relative to peers despite fiscal consolidation.