Government disputes Moody’s downgrade warning, says announcement unacceptable

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COLOMBO– Sri Lanka strongly disputed a warning by Moody’s Investors Services that it may further downgrade the island’s sovereign rating, calling the warning ill-timed, ill-judged, and unacceptable, as funds have been lined up to repay foreign debt, including a sovereign bond maturing in July.

Deeming the announcement “unwarranted’, Sri Lanka issued a counter warning that it “re-emphasizes the need for the government to revisit its relationship with rating agencies,” stating unwarranted announcements of such nature were not in the best interest of investors.

Sri Lanka’s finance ministry, in a statement issued late Monday (19), said the review for downgrade of Sri Lanka’s rating, which was already at ‘Caa1, could create uncertainty among investors who have kept faith in Sri Lankan International Sovereign Bonds (ISBs) and other investments.  “As experienced in the past, such undue uncertainty created by the rating agency could lead to price volatilities in the market for ISBs and for other investments,” it added.

The ministry reiterated that the government has taken all measures to repay the upcoming ISB maturity of US$ 1,000 million due in end July, observing that it was not the first time Moody’s has taken such surprise action on the eve of an assured imminent payment.

“Moody’s downgraded Sri Lanka on September 28, 2020, just a few days before a US$ 1,000 million ISB was to mature on October 4, 2020 and the government successfully settled the liability without any hesitation,” the statement noted, maintaining that Sri Lanka was continuing its unblemished debt service payment record.

The statement also noted that the economy has shown strong signs of broad-based recovery, with real GDP growth of 4.3% in the first quarter 2021, highlighting the domestic vaccination drive as providing confidence of a continued improvement in economic activity, combined with a possible strong rebound of the tourism sector.

Ongoing developments in the domestic production economy are expected to improve the country’s export potential while facilitating import alternatives, the statement noted, pointing out that improving domestic economic sentiments are reflected in the activity in the Colombo Stock Exchange as well.

The ministry invited investors to approach the Sri Lankan policy authorities at the highest levels, who always remain open for constructive dialogue and welcome any one-on-one engagement or roadshow discussions, without being dissuaded by unsubstantiated announcements.

-ENCL

 

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