Sri Lanka among most vulnerable economies – Moody’s

Ramesh Irugalbandara

Colombo (News1st) – A report by the Moody’s investor service has ranked Sri Lanka among the most vulnerable economies exposed to interest rate shocks over the next four years, due to relatively short average debt maturities and weak debt affordability. The report comes ahead of the country’s bunched up external debt repayments from 2019 to 2022.

Elisa Parisi-Capone, a Moody’s Vice President-Senior Analyst and co-author of the report says the sovereigns most vulnerable to an interest rate shock are generally low rated, with shorter maturities and weak debt affordability. According to Moody’s, Sri Lanka’s interest to revenue ratio could increase by between 5.3% and 10.4% over the next four years, from the current 35 percent, in a potential moderate or severe shock, compared with the 0.8 percent decline expected in the baseline.

It adds Sri Lanka also remained as one of the weakest economies in terms of fiscal strength as the country is ranked among the nations which scored the lowest points on the 15 rung scale in Moody’s global sovereign rating.

The rating agency highlighted that Pakistan, Mongolia, Sri Lanka and the Maldives are most exposed to higher costs of debt in the Asia Pacific region. Most of China’s investments have gone to these same countries. Moody’s notes that frontier markers such as Egypt, Pakistan, Mongolia, Sri Lanka, Belarus, The Maldives, Ghana and Kenya which are rated Ba1 or lower, rely on concessional financing for more than 40% of their external Government debt.