Sri Lanka policy incoherence hurting rating, potential lenders: Fitch
Monday May 18, 2020 10:38:40
ECONOMYNEXT – The lack of a coherent policy framework is hurting the sovereign rating and also potential lenders who may want to finance the country, an analyst at Fitch Ratings which downgraded the country to a ‘B-‘ a notch above CCC has said.
The outlook is also negative at the lower level.
Sri Lanka has about 4 to 4.5 billion US dollars in foreign loans to pay in the next few years and this year about 3.2 billion US dollars remain to be paid.
Sri Lanka cut rates and started injecting liquidity from the last week of February 2020, just before a Coronavirus crisis hit and ratcheted up money printing to unprecedented levels as the crisis hit, sending the rupee crashing down to 200 and earning a downgrade.
When money is printed, a country with a pegged exchange rate regime runs out of foreign exchange raising doubts about the ability of a country to repay foreign loans.
Sri Lanka has said it is talking with the Asian Development Bank, the AIIB, and AFD to raise budget support loans.