Sri Lanka policy incoherence hurting rating, potential lenders: Fitch

Sri Lanka policy incoherence hurting rating, potential lenders: Fitch

Monday May 18, 2020 10:38:40

Sri Lanka policy incoherence hurting rating

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.

Public & External Financing Outlook

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.

SEE ALSO

https://economynext.com/sumanthiran-tells-the-supreme-court-a-country-without-parliament-is-not-a-democracy-70097/

https://economynext.com/cyclone-amphan-packing-100-km-winds-moving-towards-west-bengal-70095/

https://economynext.com/sri-lanka-bond-yields-gain-70094/

 




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