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Moody’s debt rating of SL “ill-timed and unacceptable” says Govt.

28 Oct 2021

The Government of Sri Lanka (GOSL) expressed strong displeasure on the recent assessment by Moody’s Investors Service (Moody’s) that led to the rating action, after being placed under review for downgrade three months ago in a similar fashion.  “Once again, Moody’s irrational rating action with regard to Sri Lanka comes a few days before a key event, namely the announcement of the Government Budget for 2022, and this apparent hastiness and the view expressed during discussions with Moody’s analysts that the nature of the Budget is irrelevant to the financing plans of the Government clearly demonstrates the lack of understanding of such analysts,” the Central Bank of Sri Lanka (CBSL) said in a statement today (28). Further, the CBSL also highlighted that the rating agency has failed to recognise the medium to long term funding arrangements that are being finalised with various bilateral sources, which are due to be materialised in the near term. “They include, among others, credit lines of several billions of USD from India and the Middle Eastern counterparts to procure petroleum; an arrangement for a large forex loan from a Middle Eastern nation as a bilateral long-term loan, and the proposals received for the syndicated loan arrangement that are being evaluated at present. In addition, a substantial amount of funds is expected from the already lined-up prioritised project loan related inflows to the Government. The recent discussions on bilateral currency SWAP arrangements with several central banks are also expected to provide the country with additional support in the near term,” the statement read. This failure, according to the CBSL, translates to any assessment on the repayment capacity of the Government carrying 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. Nevertheless, it is clear that international investors have continued to put faith in Sri Lanka’s plans for recovery, as repeatedly reflected in their preference to hold Sri Lanka’s International Sovereign Bonds (ISBs) to maturity, despite claims by Moody’s about a heightened risk of default by Sri Lanka,” CBSL further expressed.  


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