Moody’s cautions of downgrading Sri Lanka’s credit rankings

Moody’s cautions of downgrading Sri Lanka’s credit rankings

Moody’s cautions of downgrading Sri Lanka’s credit rankings

Written by Staff Writer

18 Apr, 2020 | 2:48 pm

COLOMBO (News1st): The Moody’s rating agency has cautioned that it would downgrade Sri Lanka’s rating if its external debt repayments come at a significant cost.

“The government’s external debt service payments amount to approximately $4 billion between 2020 and 2025,” Moody’s said in a statement on Friday.

Sri Lanka was downgraded from B1 to B2 in November 2018 – meaning its obligations to the credit agency are considered speculative and are subject to high credit risk.

Moody’s cautioned of a further slip in ratings, citing rising risks of heightened financial stress and macroeconomic instability, due to the economic impact of the coronavirus.

“Moody’s expects Sri Lanka’s economy to grow just 1.5% in 2020,” the statement read.

The country’s manufacturing and service sectors hit record lows in March, the central bank said in a statement, weeks after it announced that the trade deficit had widened in January.

“Weaker foreign exchange inflows from exports, tourism activity and overseas remittances will further weaken Sri Lanka’s already fragile external position,” the rating agency said.

It added that Sri Lanka will continue to face mounting fiscal pressures to deliver high-quality social services and infrastructure with the rising population.

Moody’s said implementing fiscal measures to narrow trade deficits and minimise borrowing needs would be positive for Sri Lanka’s rating.

Sri Lanka’s economy is in a troubled state after it failed to raise 220 million dollars through development bonds in late March.

The International Monetary Fund has also said it is likely to delay issuing a 190 million dollar tranche of a loan worth 1.5 billion dollars disbursed over four years.

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