Sri Lanka Sovereign Strategy Brings Results, Says Central Bank

24th September 2010, www.island.lk

The Central Bank last afternoon said the medium term sovereign rating strategy brought positive results.

"Sri Lanka’s sovereign credit rating has been upgraded by the international rating agencies, Standard & Poor’s (S&P) and Fitch Ratings, who have recently assigned improved credit ratings to the country. A third rating agency, Moody’s Investors Service, has also assigned a comparable credit rating to Sri Lanka, as given below.

* On 14 September 2010, Standard & Poor’s (S&P) upgraded Sri Lanka’s long-term foreign currency sovereign credit rating to B+ and the long term local currency rating to BB- with a stable outlook.

* On 21 September 2010, Fitch Ratings affirmed Sri Lanka’s long term foreign and local currency Issuer Default Ratings (IDR) at B+ while upgrading the outlook to "Positive".

* On 22 September 2010, Moody’s Investors Service assigned a B1 foreign currency issuer rating with a stable outlook.

Given the many positive developments in the country during the post-conflict period, these rating upgrades have been expected. The improved macroeconomic fundamentals, prudent monetary policy, fiscal consolidation, planned structural

improvements of the economy, and high economic growth prospects will further support the enhancement of Sri Lanka’s sovereign credit rating in the near to medium term," the Central Bank said in a statement.

"These upgrades could be viewed as an outcome of the strategy towards upgrading Sri Lanka’s sovereign rating over the medium term. For this purpose the CBSL recently appointed a high level Sovereign Rating Committee (SRC), comprising senior officials

of the Ministry of Finance and Planning (MOFP), CBSL, and some private sector leaders. The SRC has been assigned to make regular reviews on the developments of the economy and have negotiations with the rating agencies through Rating Advisors towards upgrading the country’s sovereign rating," it said.

The Central Bank has also upgraded the forecast for economic growth to between 7.5 and 8 percent given the robust 8.5 percent growth in GDP during the second quarter of the year, from 7.1 percent the previous quarter. Sri Lanka’s economy grew by 3.5 percent in 2009.

All three ratings agencies said the government’s fiscal performance would have to improve if ratings are to be improved in future. The budget deficit for 2009 ballooned to 9.9 percent of GDP from an estimated target of 7 percent.

Related Info:
S&P Raises Sri Lanka’s Ratings. B+ for Foreign Currency Debt with a Stable Outlook

Fitch Affirms Sri Lanka's LTIDR B+. Revised Outlook to Positive from Stable

Moody's Gives Sri Lanka B1 Sovereign Rating with a Stable Outlook