https://colombogazette.com/2021/07/19/moodys-places-sri-lankas-ratings-under-review-for-downgrade/
Moody’s Investors Service (“Moody’s”) has today placed the Government of Sri Lanka’s Caa1 foreign currency long-term issuer and senior unsecured debt ratings under review for downgrade.
The decision to place the ratings under review for downgrade is driven by Moody’s assessment that Sri Lanka’s increasingly fragile external liquidity position raises the risk of default.
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.
Although the Government has secured some financing, mainly from bilateral sources, its financing options remain narrow with borrowing costs in international markets still prohibitive.
Absent large and sustained capital inflows through a credible external financing strategy, Moody’s expects Sri Lanka’s foreign exchange reserves to continue declining from already low levels, further eroding its ability to meet sizeable and recurring external debt servicing needs, and increasing balance of payment risks. Extremely weak debt affordability — with interest payments absorbing a very large share of the government’s very narrow revenue base — compounds the debt repayment challenge.
The rating review will focus on assessing whether the sovereign is able to use a period of time provided by its current foreign exchange reserves and bilateral arrangements to implement measures that widen and increase its financing sources for the medium term, and thereby avoid default for the foreseeable future.
Sri Lanka’s foreign currency country ceiling has been lowered to Caa1 from B3, while the local currency country ceiling remains unchanged at B1.
The three-notch gap between the local currency ceiling and the sovereign rating balances relatively predictable institutions and government actions against the low and declining foreign exchange reserves adequacy that raises macroeconomic risks as well as the challenging domestic political environment that weighs on policymaking.
The three-notch gap between the foreign currency ceiling and local currency ceiling takes into consideration the high level of external indebtedness and the risk of transfer and convertibility restrictions being imposed given low foreign exchange reserves adequacy, with some capital flow management measures already imposed.
These ceilings typically act as a cap on the ratings that can be assigned to the obligations of other entities domiciled in the country. (Colombo Gazette)
https://www.dailymirror.lk/latest_n...7LYVYW6XaxRUhETIT8CJrNi2TblYyFvIY3qaWylF-kIik
Hours after the Moody's Investors Service has placed Sri Lanka's rating 'under review for downgrade," the government hit back at the Moody's Investors Service, stating that unwarranted announcement by Moody's reemphasizes the need for the Sri Lankan Government to revisit its relationship with rating agencies.
Issuing a statement by the Finance Ministry, the government said that it was surprised over the announcement by Moody's Investors Service, "at a time when the GOSL has diligently lined up adequate funds to repay its maturing foreign debt liabilities, including the International Sovereign Bond (ISB) maturing at end July 2021."
"Moody's has placed Sri Lanka's rating 'under review for downgrade," although this does not imply a downgrade. However, Moody's action could create uncertainty among investors who have kept faith in Sri Lankan ISBs and other investments," the ministry said.
However, the statement said that the GOSL has taken all measures to repay the upcoming ISB maturity of US dollars 1,000 million due in end July 2021."
"The Sri Lankan economy has shown strong signs of broad based recovery, with a real GDP growth of 4.3 per cent in the first quarter 2021. The domestic vaccination drive is continuing at full force, providing confidence of a continued improvement in economy activity, combined with a possible strong rebound of the tourism sector," it said.
------ Post added on Jul 20, 2021 at 10:24 AM
Moody’s Investors Service (“Moody’s”) has today placed the Government of Sri Lanka’s Caa1 foreign currency long-term issuer and senior unsecured debt ratings under review for downgrade.
The decision to place the ratings under review for downgrade is driven by Moody’s assessment that Sri Lanka’s increasingly fragile external liquidity position raises the risk of default.
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.
Although the Government has secured some financing, mainly from bilateral sources, its financing options remain narrow with borrowing costs in international markets still prohibitive.
Absent large and sustained capital inflows through a credible external financing strategy, Moody’s expects Sri Lanka’s foreign exchange reserves to continue declining from already low levels, further eroding its ability to meet sizeable and recurring external debt servicing needs, and increasing balance of payment risks. Extremely weak debt affordability — with interest payments absorbing a very large share of the government’s very narrow revenue base — compounds the debt repayment challenge.
The rating review will focus on assessing whether the sovereign is able to use a period of time provided by its current foreign exchange reserves and bilateral arrangements to implement measures that widen and increase its financing sources for the medium term, and thereby avoid default for the foreseeable future.
Sri Lanka’s foreign currency country ceiling has been lowered to Caa1 from B3, while the local currency country ceiling remains unchanged at B1.
The three-notch gap between the local currency ceiling and the sovereign rating balances relatively predictable institutions and government actions against the low and declining foreign exchange reserves adequacy that raises macroeconomic risks as well as the challenging domestic political environment that weighs on policymaking.
The three-notch gap between the foreign currency ceiling and local currency ceiling takes into consideration the high level of external indebtedness and the risk of transfer and convertibility restrictions being imposed given low foreign exchange reserves adequacy, with some capital flow management measures already imposed.
These ceilings typically act as a cap on the ratings that can be assigned to the obligations of other entities domiciled in the country. (Colombo Gazette)
SL hits back at Moody’s Investors Service
https://www.dailymirror.lk/latest_n...7LYVYW6XaxRUhETIT8CJrNi2TblYyFvIY3qaWylF-kIik
Hours after the Moody's Investors Service has placed Sri Lanka's rating 'under review for downgrade," the government hit back at the Moody's Investors Service, stating that unwarranted announcement by Moody's reemphasizes the need for the Sri Lankan Government to revisit its relationship with rating agencies.
Issuing a statement by the Finance Ministry, the government said that it was surprised over the announcement by Moody's Investors Service, "at a time when the GOSL has diligently lined up adequate funds to repay its maturing foreign debt liabilities, including the International Sovereign Bond (ISB) maturing at end July 2021."
"Moody's has placed Sri Lanka's rating 'under review for downgrade," although this does not imply a downgrade. However, Moody's action could create uncertainty among investors who have kept faith in Sri Lankan ISBs and other investments," the ministry said.
However, the statement said that the GOSL has taken all measures to repay the upcoming ISB maturity of US dollars 1,000 million due in end July 2021."
"The Sri Lankan economy has shown strong signs of broad based recovery, with a real GDP growth of 4.3 per cent in the first quarter 2021. The domestic vaccination drive is continuing at full force, providing confidence of a continued improvement in economy activity, combined with a possible strong rebound of the tourism sector," it said.
------ Post added on Jul 20, 2021 at 10:24 AM
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