Moody’s warns of lasting impact over Lanka’s political crisis

Rating agency Moody’s has warned of serious lasting impact on global investor confidence on account of Sri Lanka’s worsening political crisis. 

“Uncertainty about the direction of future policy following the recent political crisis could have a large and lasting negative impact on international investors’ confidence, undermining Sri Lanka’s ability to refinance forthcoming external debt at affordable costs,” Moody’s said in its 2019 Global Emerging Market Outlook. It said Sri Lanka’s large external financing needs and substantial foreign currency Government debt raise its vulnerability. “External payments due over the next year are materially higher than foreign exchange reserves, reflected in our forecast of an EVI of 161% for 2019,” Moody’s said.

“The Government’s gross borrowing requirement of about 16%-20% of GDP and significant foreign currency borrowing on commercial terms also make Sri Lanka sensitive to external financing conditions. Lengthening average Government debt maturities mitigate this risk,” Moody’s added.