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Monday, May 27, 2024

Government expresses ‘strong displeasure’ over Moody’s downgraded Sri Lanka’s debt rating

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The Central Bank of Sri Lanka said the government expressed its strong displeasure with regards to the Moody’s downgraded Sri Lanka’s debt rating to ‘Caa2’ from ‘Caa1’ on Thursday (28) and said the action comes a few days ahead of the budget for 2022.

In a statement, the CBSL said that Moody’s downgrade was ill-timed and unacceptable and renewed Sri Lankan authorities’ concerns about the agency’s objectivity.

“Moody’s assessment has also failed to take into account the latest developments in strengthening the country’s external position through an array of measures, some of which have already yielded intended outcomes,” the CBSL said.

Rating agency Moody’s downgraded Sri Lanka’s debt rating to ‘Caa2’ from ‘Caa1’ on Thursday (28) saying the country had failed to come up with a comprehensive debt repayment plan and low foreign exchange reserves posed the risk of defaults.

On Tuesday (26), Sri Lanka’s central bank said it was expecting investments of around USD 1.1 billion from deals being made in the real estate, ports and energy sectors to help top up the country’s flagging forex reserves.

“The decision to downgrade the ratings is driven by Moody’s assessment that the absence of comprehensive financing to meet the government’s forthcoming significant maturities, in the context of very low foreign exchange reserves, raises default risks,” Moody’s said in the release.

“In turn, this assessment reflects governance weaknesses in the ability of the country’s institutions to take measures that decisively mitigate significant and urgent risks to the balance of payments,” they added.

The CBSL, in response said the government was committed to meeting its debt obligations.

Sri Lanka’s official foreign exchange reserves had dropped to $2.5 billion by the end of September.

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