Moody’s Investors Service says that Sri Lanka (B2 stable) faces numerous domestic and external obstacles that will pose challenges to the Government’s ability to refinance its large upcoming debt obligations.
In a new report, Moody’s explores the implications of the country’s financing needs and options, the recent terrorist attacks and upcoming elections for Sri Lanka’s credit profile.
“The primary challenge facing Sri Lanka is its large external debt refinancing needs over the next five years, with over $3 billion principal payable annually on external government debt over 2020-2024,” says Matthew Circosta, a Moody’s Analyst.
“While a range of financing options, including international dollar bond issuance and loans from bilateral and multilateral lenders, could support refinancing, the government is highly vulnerable to sudden shifts in investor sentiment that could affect the availability and cost of these funding sources,” adds Circosta.
Moody’s says lower tourism arrivals and spending following the April 2019 terrorist attacks will hit GDP growth and add further pressure to public and external finances.
Political tensions could also resurface before and after the presidential elections scheduled for late 2019 and the parliamentary election in 2020, with the potential to interrupt reforms and undermine investor confidence.