Moody's downgrades Sri Lanka

Moody's Investors Service said it 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. These actions conclude the review for downgrade started on July 19, the agency said.

“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,” the agency said in a press release.

“The stable outlook reflects Moody's view that the pressures that Sri Lanka's government faces are consistent with a Caa2 rating level. Downside risks to foreign-exchange reserves adequacy remain without comprehensive financing and narrow funding options.”

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