The Central Bank of Sri Lanka is of the view that the decision by Moody’s Investors Service to downgrade the Government of Sri Lanka’s Foreign Currency Issuer and Senior Unsecured Ratings from B1 to B2 does not properly reflect the country’s macroeconomic fundamentals.
The Central Bank wishes to reiterate that Sri Lanka’s macroeconomic position has neither deteriorated nor has there been any policy slippage since Moody’s last rating decision in July 2018, in spite of the recent developments in the country’s political sphere.
In fact, based on satisfactory programme performance, the Sri Lankan authorities and the International Monetary Fund reached staff-level agreement following the fifth review of the Extended Fund Facility Programme, on the 26th of October 2018, and the agreement was to be announced on 29th October. Programme discussions are currently on hold, pending clarity on the political situation.
Sri Lanka’s current level of gross official reserves amounting to 7.2 billion US dollars is sufficient for the country to meet its external debt obligations in the period ahead. In addition, as a precautionary measure, the Central Bank has initiated negotiations with the central banks of friendly nations, with regard to obtaining foreign currency SWAP facilities of sizable amounts.
These measures will further strengthen the country’s foreign reserve adequacy, and would enable timely servicing of external obligations, while intervening cautiously in the Foreign Exchange Market to prevent a disorderly adjustment of the Exchange Rate.