The downgrading of Sri Lanka by an international body to a high-risk debt country appears to be a serious obstacle to the Central Bank’s plans.
Moody’s, the world’s leading international credit rating agency, has downgraded Sri Lanka from a ‘high’ credit risk country to a ‘very high’ credit risk country.
The new announcement comes as preparations are underway for a $ 1 billion bond issue on October 4.
Moody’s Investors Service has announced that it has downgraded Sri Lanka from B2 to Caa-1 in a September 28 announcement. The decision was taken following investigations into Sri Lanka, which began on April 17, 2020. The report also said that the corona virus outbreak could be seen as a social catastrophe and that Sri Lanka’s funding and acceptance to the outside world was already in a state of significant disrepair.
The agency downgraded the Sri Lankan government’s long-term foreign currency issue and senior insecurity ratings, highlighting the country’s debt-ridden costs, high budget deficits and limited space for reforms.
In a statement, they said that due to the limited liquidity of Sri Lanka’s unsafe or sustainable sources of income to meet the foreign loan installments due over the next few years, it would be difficult to repay the loan installments due to external liquidity and external risk. . At such a time, investor sentiment will be volatile as the market will be at risk of re-financing, the statement said.
The statement said, “This shock comes at a time when Sri Lanka’s debt situation is at high risk due to declining reserve coverage for large external debt payments and poor creditworthiness,” the statement said. And due to the long-term economic downturn, Sri Lanka will also have to face a significant reduction in current revenues.
The government does not agree
However, the government has not agreed to acknowledge the precarious state of the country’s economy.
The finance ministry said in a statement that it regretted that Moody had downgraded Sri Lanka.
The Ministry of Finance says that Sri Lanka is rapidly recovering from the Covid 19 epidemic and is working to gradually cover the budget deficit.
Sri Lanka’s foreign exchange reserves had grown to $ 7.4 billion by August and garment exports had returned to pre- Covid status, the Finance Ministry said in a statement.