Reuters: Sri Lanka’s Central Bank Governor shrugged off Fitch Rating’s downgrading of the country on Monday and said he “completely disagrees” with its decision to assign a “negative outlook” to two ratings.
Fitch downgraded Sri Lanka’s Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) to ‘B+’ from ‘BB-’ on increasing refinancing risks, significant debt maturities and weaker public finances. The “negative outlook” was assigned to the IDRs.
“Rating agencies have their views,” Central Bank Governor Arjuna Mahendran told Reuters. “I don’t take this very seriously and the markets I think know what the vulnerabilities are. So it is not going to cause any problems for the Central Bank or the Government.”
He also said “I completely disagree with this negative outlook. I think they are not aware of the fact that the IMF is in very serious discussions with the Government and we are about to announce a significant aid support package.”
Sri Lanka is talking with the International Monetary Fund about a loan amid concerns over pressures on its balance of payments, outflows from government bonds and a ballooning fiscal deficit.
Fitch, in its statement, said the Sri Lankan sovereign’s external liquidity position remains strained, reflecting pressure on foreign exchange reserves.
Sri Lanka’s reserves have fallen by a third to $6.3 billion by January from a peak in October 2014 mainly due to $1.30 billion outflows in government bonds since January 2015.
Fitch also said the deterioration in Sri Lanka’s fiscal finances is driven partly by consistently low government revenues, estimated at 13% of the gross domestic product (GDP).
Sri Lanka’s budget deficit overshot to 7.2% of the GDP last year, higher than the original forecast of 4.4% mainly due to the payment of unpaid bills, Finance Minister Ravi Karunanayake has said.