Moody’s Investors Service said one reason for the downgrading was the expectation of a further weakening in some of Sri Lanka’s fiscal metrics in an environment of subdued GDP growth which could lead to renewed balance of payments pressure.
The other reason was the possibility that the effectiveness of the fiscal reforms envisaged by the Government may be lower than we currently expect, which could further weaken fiscal and economic performance.
At the same time, Moody’s said Sri Lanka’s B1 rating is supported by the economy’s robust growth potential and higher income levels than similarly-rated sovereigns.
It said that with the effective implementation of some of the fiscal policy measures and other structural reforms planned under the IMF programme, the Government would be able to tap a significant potential revenue base.
Moody’s Investors Service said that on 16 June 2016, a rating committee was called to discuss the rating of the Sri Lanka, Government of.
The main points raised during the discussion were that the issuer’s economic fundamentals, including its economic strength, have not materially changed, the issuer’s institutional strength/framework, have materially decreased, the issuer’s fiscal or financial strength, including its debt profile, has not materially changed and the issuer’s susceptibility to event risks has not materially changed. (Colombo Gazette)