State Minister for Finance, Capital Market, and State Enterprise Reforms Ajith Nivard Cabraal requested foreign investors not to be dissuaded by the recent unwarranted rating downgrade and the erroneous analysis published recklessly by Moody's Investors Service, but to be guided by improving economic conditions.
"Foreign investors, we are advising them not to be dissuaded by the recent ‘unwarranted’ rating downgrade. Because every time they had acted on some of those downgrades, particularly in the case of Sri Lanka, many people have lost money. They have reacted to those downgrades, they have sometimes sold off their positions and later on, they had to buy those same positions at a much higher price," the State Minister said whilst addressing a media briefing in Colombo yesterday .
He further added that; “In 2009, when the Sri Lankan credit was downgraded, markets reacted in another way. Markets didn’t react in a way that Sri Lanka was downgraded, they reacted in the way that Sri Lanka was upgraded. They were directly opposite to the position that was taken by the rating agency. It is the reputation that is at risk for them, but for us, it is our economy."
Moody's Investors Service ("Moody's") on Monday (28) downgraded the Government of Sri Lanka's long-term foreign-currency issuer and senior unsecured ratings to Caa1 from B2 and changed the outlook to stable. This concludes the review for downgrade initiated on 17 April 2020.
He said that the international rating agency had completely ignored the current ground realities and the ongoing economic recovery of the country, after the COVID-19-related lockdowns.
On Monday, Moody’s downgraded Sri Lanka’s sovereign rating by unusual two notches to Caa1 (CCC+ equivalent), on deepening fiscal-side constraints, higher foreign debt risks and perceived weaknesses in the country’s institutions and governance. The outlook was changed to stable.
(LIN)