SJB MP Dr. Harsha de Silva gestures at the media briefing yesterday 

• Says latest downgrade puts SL at lowest grading point in history 
• Warns that if IMF agreement not struck, SL will lose market confidence, struggle to repay debt 
• Calls for reforms, long-term solutions
• Insists country could face severe austerity measures unless concerns addressed   

By Asiri Fernando

Samagi Jana Balawegaya (SJB) Parliamentarian Dr. Harsha de Silva yesterday raised alarm over international rating agency Moody’s downgrade, warning the Government that it was the lowest ever rating given to Sri Lanka, and that the country was heading into a serious economic crisis unless multilateral support is secured. Moody’s Investors Service on Monday downgraded Sri Lanka’s sovereign rating two notches to Caa1, from B2, but said the outlook was stable. Among the key reasons for the downgrade was Sri Lanka’s weak debt affordability, high Budget deficit, policy opaqueness, and weakening institutions and governance.  Addressing a press conference yesterday, Dr. de Silva said that concrete economic reforms were urgently needed, and that the Government should look to organisations such as the International Monetary Fund (IMF) to remedy the situation. 

Dr. de Silva warned that if steps are not taken to bolster Sri Lanka’s foreign reserves, the country may end up with an outright import ban next year.  

“This is the first time in history that we have been downgraded two notches in one go,” the SJB Parliamentarian charged. Dr. de Silva warned the Government that unless an agreement was struck with the IMF soon, the country could be heading to debt-defaulting. 

He blamed the wide-ranging tax cuts introduced by the Government in December 2019, calling them “ill-advised”, and charged that the VAT reductions did not have an impact on the public as intended. He accused the Government of implementing poor fiscal policy that was exacerbated by the impact of COVID-19.  

“We can’t continue to find short-term solutions or fix this with patchwork solutions. The Government has to get serious. Sri Lanka has ambitions to be a transhipment hub and increase trade, but now we are restricting imports. How can we can we do these things if we stop imports? Even exports need value addition and that needs imports.  Sri Lanka won’t get anywhere by building walls around itself, we should be building bridges with the world around us.” 

He emphasised that unless steps are taken to tackle debt sustainability, Sri Lanka could face severe international pressure to implement uncomfortable austerity measures.   

“Sri Lanka may need to restructure its debt, this is something we have never done before, and even after the tsunami we didn’t have to do it. If a debt restructuring is done, we could suffer greater loss of investor confidence,” Dr. de Silva said, citing Moody’s report. 

“We are yet to see any foreign currency pour into the Special Deposit Accounts (SDAs) that the Government introduced in April. What happened to them? Where is the money? Investors always do their homework, and the reason there are no transfers is because they have no confidence in this Government.”    

Referring to the Moody’s report, the Parliamentarian opined that the ‘‘weakening of institutions and governance,’’ could be in reference to the proposed 20th Amendment, which is being challenged by several petitioners before the Supreme Court this week. 

“For example, the weakening of the Auditor General’s powers, removal of State institutions from the Auditor General’s scope, and abolishment of the Procurement Commission, could have been factors taken into account by Moody’s.” He referred to the Moody’s rating downgrade “the first international response to the proposed 20th Amendment.” 

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