Written by Amani Nilar
28 Oct, 2021 | 5:06 pm
COLOMBO (News 1st); The Government expresses strong displeasure on the recent assessment made by Moody’s Investors Service (Moody’s) that led to the rating action, after being placed under review for downgrade three months ago similarly, the Central Bank of Sri Lanka (CBSL) states.
Issuing a release in response to the downgrade by Moody’s, CBSL states that the ‘irrational’ rating comes a few days before a key event, the announcement of the Government Budget for 2022.
Moody’s has lowered Sri Lanka’s local currency bond and bank deposit ceilings to B1 from Ba2, lowered its long-term foreign currency bond ceiling to B3 from Ba3 and lowered its foreign currency bank deposit ceiling to Caa1 from B3.
The CBSL further states that the views expressed during discussions with Moody’s analysts about the nature of the Budget being irrelevant to the financing plans of the Government clearly demonstrates the lack of understanding of such analysts and also reflects serious governance weaknesses of such agencies, where they systematically overlook the positive developments and expectations in emerging market economies, but attribute much greater weight to downside risks.
“Moreover, the assessment exposes the rating agency’s ignorance on the well-established political stability within a democratic setup, when it claims about “governance weaknesses” and “challenging domestic political environment”, and its obvious insensitivity to the challenges faced by a country that is recovering from adverse external events without bringing pain to investors who have stood by Sri Lanka during various difficulties that the country has undergone in the past, ” CBSL states.
The CBSL also calls out Moody’s for not being able to recognize the six-month strategic Road Map, and the medium to long term funding arrangements that are being finalized with various bilateral sources.
“Without considering such cashflows, any assessment on the repayment capacity of the Government carries prejudice. Rating action based on such biased assessment is unfair and detrimental to the country’s prospects, as Sri Lanka is emerging strongly from the adverse effects of the COVID-19 pandemic. Needless to say, such action by an international rating agency calls into question the validity of its advice to the investor community,” The CBSL alleges.
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