Moody's eyes Sri Lanka for downgrade

Moody's Investors Service said it placed the government of Sri Lanka's Caa1 foreign-currency long-term issuer and senior unsecured debt ratings under review for downgrade.

“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. 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,” the agency said in a press release.

Moody’s noted Sri Lanka has secured some financing, mainly from bilateral sources, but its financing options remain limited with borrowing costs in international markets still prohibitive.

“The rating review will focus on assessing whether the sovereign is able to use a period of time provided by its current foreign exchange reserves and bilateral arrangements to implement measures that widen and increase its financing sources for the medium term, and thereby avoid default for the foreseeable future,” the agency said.

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