Cabraal raps rating agencies

Wednesday, 7 August 2013 00:15 - - {{hitsCtrl.values.hits}}

Labels some as having ‘myopic’ views; alleges they are doing disservice to investors
Stresses that Sri Lanka has a credible plan to improve economy and fiscal management

By Shabiya Ali Ahlam Central Bank Governor Nivard Cabraal yesterday rapped credit rating agencies for being “myopic” and claimed their stand was unwarranted jeopardising Sri Lanka’s chances to woo more investors. Not minding the platform on which he was speaking, Cabraal, during his keynote at the Fitch Ratings Sri Lanka Sovereign and Banking Roundtable, didn’t mince his words.

In an apparent reaction to Standard and Poor’s downgrade of the country’s outlook last month along with other agencies, the Central Bank Chief claimed that when most things are progressing in the country, the only thing that was not improving in Sri Lanka was the credit rating. “I think there has been a bit of a myopic view taken by the credit rating agencies due to imperfections and problems noticed in other countries,” alleged Cabraal. “When they (rating agencies) speak, they say Sri Lanka has had an extraordinary transformation but when they go back, they find some reason to say that Sri Lanka should remain where it is. I think this is a disservice to the investors,” the Central Bank Chief told the Fitch forum attended by leaders of the financial services industry. Cabraal opined that investors must know that all countries are not in the same box. “We cannot say we are only South Asia. We cannot say we are the only emerging nation. It cannot just be said that Sri Lanka falls into this mould since it is fast growing. We have got to think differently,” he said. “We want people to come now and understand what Sri Lanka is all about. If they come 10 years later, because of the rating agencies’ delay with upgrading Sri Lanka’s rating, what would happen is that they will lose out and people who look at Sri Lanka closely will gain,” the Central Bank Chief stated. He emphasised that there are many investors who have come to Sri Lanka and have liked what they have seen. In that context, Cabraal recalled that recently, the country faced a situation where one of the rating agencies downgraded the outlook and the next day saw sovereign bonds tighten. “That showed what investors thought of such ratings,” he added. “It is important for us to understand that these too are factors that rating agencies would take into account. We have to appreciate the trends, movements and tendencies that take place in a country. They should also see how they should deal with situations. Rating agencies should see if there is political stability, if there is a vision that is being clearly articulated. Risks that are considered worthy should also be taken into account. They need to take note if risks are taken in a rational manner or in confidence. These are highly important factors,” CB Chief said. Noting that rating agencies have their own way of doing things, Cabraal said that at the same time, agencies must be mindful of factors on the ground as they are not only taking a decision for the country, but also for investors who decline to go to a country because of the changes that are taking place. “Sri Lanka is on par with making resilience work. We came through a difficult period but we have not moved into a trajectory of high economic growth which people could enjoy. We believe that in order to observe that status and platform, the pillars of having continuous performance, not falling into the middle income trap, and making sure that the macroeconomic stability is maintained all times and make sure that it is done,” Cabraal said. “We need to see that there is continuous infrastructure development in order to ensure that the people can do their business better and to ensure that there is sustained investor confidence. And then we could realise peace, because there will be development and with it, there will be peace,” he added. Earlier on, Cabraal said that the Central Bank would like to see an increase in the Government’s commitment towards reducing the fiscal deficit and there has been assurance from the Treasury Secretary that it would be so. “Next year, the huge interest reduction in the Government debt portfolio will be a major factor in debt consolidation and fiscal consolidation. It is certain that Sri Lanka is on track to reach 65% of debt to GDP levels in 2016. We will also see that we will be able to continue with our efforts to pump investments from outside. Sri Lanka needs about 4-5% to come in by way of foreign savings; we have a major platform for that to take place. “The fact that Fitch and other rating companies are active shows that they also believe that this transformation is taking place and they believe that these monies would continue to raise in Sri Lanka and that is a sign of encouragement. In that sense, we see the financial sector improving and the stock and debt markets also moving to a new phase,” Cabraal said. He also said that in the last Budget, there was a clear commitment to Sri Lanka attempting to be a poverty-free country by 2016. “That would have seemed like a wild dream earlier, but it is not so today. We are within reach to that mark. We need to work closely to ensure that poverty is reduced and that the income, growth and GDP disparities that we have in our provinces will also change,” Cabraal added.

Discover Kapruka, the leading online shopping platform in Sri Lanka, where you can conveniently send Gifts and Flowers to your loved ones for any event including Valentine ’s Day. Explore a wide range of popular Shopping Categories on Kapruka, including Toys, Groceries, Electronics, Birthday Cakes, Fruits, Chocolates, Flower Bouquets, Clothing, Watches, Lingerie, Gift Sets and Jewellery. Also if you’re interested in selling with Kapruka, Partner Central by Kapruka is the best solution to start with. Moreover, through Kapruka Global Shop, you can also enjoy the convenience of purchasing products from renowned platforms like Amazon and eBay and have them delivered to Sri Lanka.