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Mahinda claims reckless borrowing led to Sri Lanka’s downgrading

Jun 29, 2016
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Former President Mahinda Rajapaksa claims reckless borrowing by the present Government is the main reason why Sri Lanka was given negative outlook categorisazions this year by Moody’s, Fitch and Standard & Poor – the three top international credit rating agencies.

Speaking at the joint opposition office in Battaramulla, Rajapaksa said that all three ratings agencies had cited the huge liabilities as the main reason for their decision to downgrade Sri Lanka.

He said Standard and Poor’s not only gave Sri Lanka a negative outlook categorization but also warned that in the coming three years, the debt burden would increase further.

“They also warned that if there was no improvement in the situation, a further downgrade may follow,” he said.

Rajapaksa also said that even after the IMF decided to give Sri Lanka a loan recently, both Fitch and Moody’s issued press statements saying that they were not confident about the capacity of the Sri Lankan Government to meet the targets set by the IMF.

Moody’s stated that Sri Lanka’s needs will not be met by the IMF loan and that they expected the debt burden to increase further this year and the next.

In June this year the IMF executive board approved the loan to Sri Lanka and the first tranche of 168 million USD was also received.

“It was after the IMF money started coming in that Moody’s gave Sri Lanka a negative outlook categorization on 20 June. Experts say this is the only known instance when even acceptance into an IMF programme has failed to bolster market confidence in a country. Having given us a negative outlook categorization, Moody’s went to the extent of warning that a further downgrading of Sri Lanka may take place if the situation does not improve,” he said.

Rajapaksa added that even though entry into an IMF programme usually bolsters confidence in that country, the moves made by the Government to use the IMF programme as a cover to borrow more and more, seems to have unnerved the ratings agencies. (Colombo Gazette)

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