Moody’s ratings downgrade unwarranted, Sri Lanka Finance Ministry says

COLOMBO: Moody’s downgraded Sri Lanka’s sovereign credit rating by two notches but the government dismissed the move as without merit, AFP reported.

Sri Lanka was pushed down from “B2” (high credit risk) to “Caa1” (very high credit risk), Moody’s said in a statement.

Moody’s claimed Sri Lanka would be hard-pressed to secure funding to service its huge foreign debt.

“Moody’s expects government liquidity and external risks to intensify, as the government’s external debt service payments amount to approximately $4 billion (annually) between 2020 and 2025,” it said.

Wide budget deficits in the next few years are likely to require at least partial external financing, which is increasingly difficult to access, the international ratings agency said.

The government dismissed the downgrade as without merit.

“Moody’s ratings downgrade unwarranted, analysis erroneous and suggests reckless reaction,” the Finance Ministry said.

It said the government had “repeatedly expressed its ability and willingness to meet all its debt obligations.”

According to AFP, the ministry also said Sri Lanka’s foreign reserves had improved to $7.4 billion by the end of August as exports picked up to the pre-pandemic level of $1 billion a month.

The trade balance improved due to restrictions on non-essential imports, the ministry said.