Sri Lanka ratings under review

Foreign reserves of $3.6 billion at end of June were insufficient to cover Sri Lanka’s annual foreign debt servicing

COLOMBO:

International ratings agency Moody’s placed cash-strapped Sri Lanka under watch for a downgrade on Tuesday on rising fears that the island could default on its foreign debt. Foreign reserves of $3.6 billion at the end of June were insufficient to cover Sri Lanka’s annual foreign debt servicing - of $4 billion to $5 billion - over the next four to five years, Moody’s said. It said Colombo’s financing options were limited although it managed to obtain some bilateral loans. Colombo has announced a $250 million loan from Bangladesh, a fellow South Asian country with a much lower per capita income than Sri Lanka. “The decision to place the ratings under review for downgrade is driven by Moody’s assessment that Sri Lanka’s increasingly fragile external liquidity position raises the risk of default,” Moody’s said. In September, Moody’s downgraded Sri Lanka’s sovereign credit rating by two notches to “Caa1” (high credit risk). “Moody’s expects Sri Lanka’s foreign exchange reserves to continue declining from already low levels, further eroding its ability to meet sizeable and recurring external debt servicing needs,” the agency said.

Published in The Express Tribune, July 21^st, 2021.

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