Moody's downgrades Sri Lanka

Moody's Investors Service said it downgraded the government of Sri Lanka's foreign-currency issuer and senior unsecured ratings to B2 from B1 and changed the outlook to stable from negative.

The downgrades reflect an ongoing tightening in external and domestic financing conditions and low reserve adequacy, exacerbated most recently by a political crisis, Moody's explained.

The political woes will likely have a lasting impact on policy, even if the issues are resolved quickly, the agency said.

This will heighten refinancing risks beyond levels anticipated when Moody's affirmed the sovereign ratings at B1 with a negative outlook in July, the agency said.

Moody's also said it projects a slower pace of fiscal consolidation than assumed in July, reflecting disruption to fiscal policy implementation in a period of political turmoil.

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