Moody’s downgrades Sri Lanka’s debt rating to Caa2

Moody’s downgrades Sri Lanka’s debt rating to Caa2

(MENAFN- NewsIn. Asia) Singapore, October 29 (AdaDerana) – Moody's Investors Service ("Moody's") has today downgraded the Government of Sri Lanka's long-term foreign currency issuer and senior unsecured debt ratings to Caa2 from Caa1 under review for downgrade. The outlook is stable. This concludes the review for downgrade initiated on 19 July 2021. The decision to downgrade the ratings is driven by Moody's assessment that the absence of comprehensive financing to meet the government's forthcoming significant maturities, in the context of very low foreign exchange reserves, raises default risks. In turn, this assessment reflects governance weaknesses in the ability of the country's institutions to take measures that decisively mitigate significant and urgent risks to the balance of payments. External liquidity risks remain heightened. A large financing envelope that Moody's considers to be secure remains elusive and the sovereign continues to rely on piecemeal funding such as swap lines and bilateral loans, although prospects for non-debt generating inflows have improved somewhat since Moody's placed Sri Lanka's rating under review for downgrade. Persistently wide fiscal deficits due to the government's very narrow revenue base compound this challenge by keeping gross borrowing needs high and removing fiscal flexibility. The stable outlook reflects Moody's view