The recent expropriation bill in Sri Lanka will cast a shadow over the investment climate in the country, according to Moody’s, the international rating agency.
“…an unintended consequence of this expropriation measure may be that it casts a cloud over the investment climate. If so, it would be credit negative for Sri Lanka,” it said in comments made in its weekly credit report.
“Despite authorities’ statement that this is a one-off move and that further expropriation will not occur, the measure may undermine the predictability of future policies and increase investor uncertainty, which would make it credit negative for Sri Lanka,” Moody’s said.
The rating agency said it is unclear whether the assets will be managed by the state or resold to other investors, and how performance will be revived. “The use of the fast-track procedure, which we believe limits public scrutiny, largely reflects the tendencies of the current government to exert strong and direct influence over the economy. Nonetheless, Sri Lanka’s Supreme Court ruled early last week that the bill was not inconsistent with Sri Lanka’s constitution.”
Maintaining investor confidence is the key to Sri Lanka’s ability to continue to collect the peace dividend.
ST
