Moody’s downgrades Sri Lanka to ‘very high credit risk’ rating; nation asserts ability to meet debt obligations

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Moody’s downgrades Sri Lanka to ‘very excessive credit score danger’ score; nation asserts potential to fulfill debt obligations

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The company stated the nation could be hard-pressed to safe funding for its exterior debt service funds amounting to roughly $4 billion yearly

Colombo: Moody’s on Monday downgraded Sri Lanka’s sovereign credit standing by two notches, saying the South Asian nation could be hard-pressed to safe funding to service its large overseas debt.

Sri Lanka was pushed down from “B2” (excessive credit score danger) to “Caa1” (very excessive credit score danger), because the coronavirus pandemic compounded its financial woes, Moody’s stated in an announcement.

“Moody’s expects authorities liquidity and exterior dangers to accentuate, as the federal government’s exterior debt service funds quantity to roughly $4 billion (yearly) between 2020 and 2025,” it stated.

Broad funds deficits within the subsequent few years are more likely to require at the very least partial exterior financing, which is more and more tough to entry, the worldwide rankings company stated.

Sri Lanka’s authorities rapidly dismissed the downgrade as with out benefit. “Moody’s rankings downgrade unwarranted, evaluation inaccurate and suggests reckless response,” the finance ministry stated.

It stated the federal government had “repeatedly expressed its potential and willingness to fulfill all its debt obligations.”

The ministry stated Sri Lanka’s overseas reserves had improved to $7.4 billion by the tip of August as exports picked as much as the pre-pandemic stage of $1 billion a month.

The commerce steadiness improved as a consequence of restrictions on non-essential imports, the ministry stated, referring to a ban on automobiles and luxurious items in place since March.

Sri Lanka’s economic system contracted by an unprecedented 1.6 p.c within the first quarter of this yr, after a 2.3 p.c financial growth final yr.

Moody’s stated it anticipated Sri Lanka to repay its $1.0 billion debt maturing subsequent month by drawing down its overseas reserves, however that will “additional deplete already skinny exterior buffers.”

Sri Lanka imposed nationwide curfews between March and June in a bid to comprise the unfold of the coronavirus, which has to date contaminated greater than 3,300 folks and claimed 13 lives.

The nation has eased a lockdown, saying there had been no group unfold of the virus for 2 months.

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