Moody’s downgrades Sri Lanka’s rating to Ca
View(s):Moody’s Investors Service on Monday downgraded the Government of Sri Lanka’s long-term foreign currency issuer and senior unsecured debt ratings to Ca from Caa2.
Ca, which denotes near bankruptcy is just one above C (the lowest rating which implies the country is bankrupt).
The decision to downgrade the ratings is driven by the authorities’ announcement of debt servicing suspension on external public debt repayments, which will lead to a series of defaults with the first coupon payments for the government’s international bonds due Monday April 18.
“Given the low level of foreign exchange reserves, compounded by the rise in balance of payment pressures with higher fuel and food prices and the slow recovery in tourism and foreign direct investment inflows, Moody’s assesses that private sector creditor losses stemming from the eventual debt restructuring is likely to be material and exceed the limited levels of loss consistent with the previous Caa2 rating,” the rating agency said in a media release.
This assessment further reflects governance weaknesses in the ability of the country’s institutions to take measures that decisively address the very low adequacy of foreign exchange reserves and very weak debt affordability, thereby contributing to loss given default, at least in line with precedents by other defaulting sovereigns.
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