Upward Revision of Sovereign Ratings on Sri Lanka Expected with Favourable Recommendations from Three Major Rating Agencies

22nd May 2010, www.sundaytimes.lk

Sri Lanka expects an upward revision in sovereign ratings with favourable recommendations from officials from three major rating agencies who are expected to visit the island before the end of this month to review the current country rating.

They will hold meetings with Central Bank (CB) officials, politicians, financial experts, diplomats, foreign lending agencies, etc and report their findings to the rating committee, a senior CB official said.
CB Deputy Governor Dharma Dheerasinghe, who is also the head of the country’s high level Sovereign Rating Committee, told the Business Times that teams of analysts from Standard & Poor (S&P), Fitch and Moody would be visiting the island separately to prepare individual reports to review the ratings which will be forwarded to their top level committees to make the final decision.“The committee meetings will be held in London and New York in July and we are also visiting them to present our case,” he said.

The committee made up of top CB, Finance Ministry and private sector representatives had been appointed to develop a strategy to push Sri Lanka's sovereign rating to investment grade. It is charged with devising a strategy of taking Sri Lanka’s current speculative B+ (Fitch) and B (S&P) rating to an investment grade 'BBB-' or higher over the next four years. Dr. Dheerasinghe noted that "S&P may raise the ratings on Sri Lanka on evidence of more comprehensive fiscal or structural economic reforms”.

At the moment the country’s rating is B+ and “we hope that it will be upgraded by these committees based on the reports of these analysts,” he said adding that they expect an upgrade in the sovereign rating to minimum grade of BBB –or higher.

However an economic expert who wished to be anonymous told the Business Times that S&P may lower the rating if Sri Lanka deviates substantially from the IMF program’s framework, or if expectations on the recovery in growth prospects and revenue improvements disappoint."With inflation pressures mounting in Asia, Sri Lanka is ranked among countries that have lower risks of social unrest because of popular governments, higher growth and lower unemployment mitigating such risks caused by rising prices,” he revealed.

Last year Sri Lanka received a B1 sovereign rating from Moody’s with a stable outlook and officials are confident there would be an upgrade given the government’s improved fiscal performance for 2010, with the deficit reaching 7.9% of GDP, slightly lower than the 8 % target. S&P had given Sri Lanka a long term foreign currency rating of B+ and a long term local currency rating of BB-, both upward revisions from 2009. Fitch has affirmed Sri Lanka’s long term local and foreign currency issuer default rate at B+, revising the outlook from stable to positive.

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Sri Lanka's Sovereign Rating Upgraded by an Agency

21st November 2010, www.sundaytimes.lk, By Bandula Sirimanna

Sri Lanka's sovereign rating has been upgraded by one notch since the economy is now very robust. This was a result of the Central Bank's efforts to implement a carefully designed, forward looking and effective strategy with the participation and co-operation of all stakeholders, country authorities, private sector business leaders, chambers and rating advisors, during the past few months, a member of the high level Sovereign Rating Committee, told the Business Times.

The committee makes regular reviews of developments of the economy and conveys these improvements to the rating agencies through rating advisors, to push the rating up, he said.

The committee is charged with devising a strategy of taking the Sri Lanka current speculative B+ (Fitch) and B (S&P) rating to an investment grade 'BBB-' or higher over the next four years.

A senior official of the Central Bank said that Capital Intelligence (CI), the international credit rating agency, announced that it has raised Sri Lanka's long-term foreign currency rating to 'B+' from 'B' and its long-term local currency rating to 'BB-'from 'B+'.

At the same time the rating agency has affirmed the sovereign's short-term foreign and local currency ratings of 'B'. The outlook is 'Stable' . The upgrade in the sovereign's ratings reflects the marked improvement in the political and security situation following the end of the civil war, a strong recovery in international reserves to record high levels, and better prospects for fundamental tax reform and fiscal consolidation over the medium term.

The ratings take into account CI's expectation that the government will move forward on promised tax reforms and reduce the large budget deficit and high public debt ratio in line with its medium-term plans, while at the same time taking steps to strengthen export performance and attract foreign direct investments, he said. Sri Lanka's sovereign ratings are foremost constrained by chronic fiscal problems including high indebtedness, weak revenue-generating capacity and a rigid expenditure structure.

Fiscal performance has improved in 2010, however, and the budget deficit should decline to about 8% of GDP from 9.9% in 2009.

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Sri Lanka Sovereign Strategy Brings Results, Says Central Bank

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

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

22nd September 2010, www.lankabusinessonline.com

Moody's Investors Service said it had given a 'B1' sovereign rating for Sri Lanka with a 'stable' outlook on the end of a war, low inflation and efforts to contain budget deficit, despite having high levels of debt.

"The stable outlook also considers Sri Lanka's small size, partial dollarization, and relatively modest gross domestic savings," Aninda Mitra, Moody's lead sovereign analyst for sri Lanka said in a statement.

"We therefore place more forward-looking credit emphasis on an improvement in fiscal management, which is an area where reforms are planned, but a track record is awaited."

He said the rating agency expected the "re-integration of the northern and eastern regions into Sri Lanka's economy will sustain a higher growth rate with single-digit inflation without destabilizing the external current account position."

In second quarter of 2010 Sri Lanka's economy grew by 8.5 percent, according to the country's statistics office.

"The outlook also reflects considerable scope for fiscal reforms and high likelihood of foreign investment inflows against lingering risks posed by a large government debt overhang and remaining, though, diminishing, external financing risks," Mitra said.

The end of Sri Lanka's civil conflict and a structural improvement in its economic prospects were important considerations for the ratings decision, Moody's said.

The rating agency said monetary management was "reasonably strong" relationships with official creditors and bilateral partners were strong setting the stage for a sustained rebound in the economy.

The agency had noted "moderate" rankings for rule of law and government effectiveness by the World Bank.

Fitch Ratings lifted the outlook for Sri Lanka 'B+' speculative rating to 'positive' from stable Tuesday and Standard & Poors' upgraded the underlying rating to 'B+' earlier. Sri Lanka is now in the market for a billion US dollar sovereign bond.

Government officials are taking part in an investor meeting in New York this week.

Moody's said government financial strength was low, with a large debt and debt service largely due to a war, but investor interest was improving. Sri Lanka's national debt is about 80 percent of the economy.

"There are also proposed fiscal reforms which are expected to lower future budget deficits," Moody's said.

"Moreover, the country's improving growth prospects and a downshift in local interest rates will also support the government's debt dynamics."

Ratings could be upgraded if budgets improve and inflation is low and less volatile, foreign reserves and foreign direct investment improves, Moody's said.

But ratings could be downgraded if there is no progress in improving budgets, there is loss of inflation control and foreign currency liquidity worsens, or recent political instability worsens local or foreign investor confidence.

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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

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

22nd September 2010, www.dailynews.lk

Fitch Ratings yesterday affirmed Sri Lanka’s Long-term foreign and local currency Issuer Default Ratings (IDRs) at ‘B+’, and simultaneously revised the Outlook to Positive from Stable. Fitch also has affirmed Sri Lanka’s Short-term IDR at ‘B’ and Country Ceiling at ‘B+’.

The Outlook revision is in large part a reflection of Sri Lanka’s economy benefitting from the end of a war in 2009, from a more disciplined policy framework put in place under the Stand-By Arrangement (SBA) with the IMF, and from an improved external liquidity position bolstered by the IMF program.

Fitch believes these developments support the prospects for Sri Lanka to achieve sustained medium-term growth, without a resurgence in inflation or another bout of external liquidity stress (as experienced over end-2008 to early-2009). Foreign exchange reserves stood at USD5.8bn at end- July 2010, well above the low of USD1.1bn in March 2009, bolstered by USD1.0bn of IMF funds.

Sri Lanka has made headway in rebuilding and integrating the two war-torn Northern and Eastern provinces into the rest of the local economy, which is helping to boost Sri Lanka’s productive capacity, particularly in the agriculture and tourism sectors.

This is highlighted by real GDP growing 8.5 percent yoy in Q210, from a 7.1 percent yoy rise in Q110. Fitch is forecasting real GDP growth to average 7.2 percent in 2010-2012, versus an average of 5.1 percent over the last 20 years.

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

Sri Lanka to Seek Ratings from Moody's, Standard & Poor’s & Fitch Before $1bn Sovereign Bond Issue

10th August 2010, www.bloomberg.com

Sri Lanka is seeking a rating of its sovereign debt from Moody’s Investors Service ahead of a planned $1 billion overseas bond sale, central bank Assistant Governor C.J.P. Siriwardena said.

The South Asian nation last month announced plans to sell the bonds, with maturities of as much as 10 years, by the end of 2010 to help refinance expensive loans. Moody’s doesn’t have a credit rating for Sri Lanka, while Standard & Poor’s and Fitch Ratings place the country’s long-term foreign-currency debt at non-investment grade.

“This is the ideal time to get a rating from all the three agencies,” Siriwardena said in a telephone interview today from Colombo. He said the economy is poised to grow more than 7 percent this year after the end of the country’s civil war.

Sri Lankan troops defeated the separatist Liberation Tigers of Tamil Eelam in May 2009 and ended their 26-year struggle for a separate homeland, boosting growth prospects.

S&P and Fitch raised their outlook on Sri Lanka’s debt in October last year. S&P revised it to positive from stable, and assigned the nation’s long-term foreign-currency debt rating at B, five levels below investment grade. Fitch changed the outlook to stable from negative. It affirmed Sri Lanka’s rating at B+, four levels below investment grade.

Moody’s Visit

Representatives from Moody’s are in the island nation this week to meet with senior government and central bank officials, Siriwardena said. He said Fitch and S&P officials will also visit Sri Lanka this month to assess the economy.

“Sri Lanka should get a rating upgrade of at least one notch since the economy is now very robust,” said Sarath Rajapakse, director of research at Capital Trust Securities Ltd. in Colombo. “The bond offering will attract strong demand.”

The benchmark Colombo All-Share Index rose 4.1 percent to 5063.98 at 1:53 p.m. local time. The yield on the benchmark four-year bond was little changed at 9.3 percent, according to Standard Chartered Plc.

This year’s overseas debt sale will be the third by the nation since its debut offering in October 2007.

The nation’s last global bond sale in October attracted bids for more than 13 times the $500 million offered.

President Mahinda Rajapaksa’s government is aiming to accelerate growth to at least 7 percent in 2010, the fastest pace in four years.

To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net.

Sri Lanka to be Rated by Moody's to Assess Sovereign Rating

06th August 2010, www.news360.lk

Sri Lanka has invited international rating firm Moody’s to assess the country’s “Sovereign Rating”.

Deputy Governor of the Central Bank K.G.D.D. Dheerasinghe citing reasons for the latest move said “We want to have ratings from all 3 top rating agencies”.

Accordingly Moody’s will join Fitch Ratings and S&P who is already assessing Sri Lanka’s sovereign rating.

A team from Moody’s will visit Sri Lanka next Monday to hold discussions with the Government officials including the Central Bankers.

Apart from the team from Moody’s, rating teams from both Fitch and S&P also will arrive in Sri Lanka during the next week to hold discussions with the Government officials.

All 3 are expected to come out with their annual country ratings on Sri Lanka following the planned meetings.

Sri Lanka is also looking to get a rating upgrade before it enters the international capital markets next month to raise US$ 1 billion via a sovereign bond.

An official of the Public debt department said “having a rating upgrade will help the country to be in a sound footing, when it start to raise dollars from the global market place”

In 2009 October Fitch upgraded Sri Lanka’s Sovereign rating to “B +” and announced the outlook as “stable” while S&P too in the same month upgraded the country rating to ‘B” and converted the outlook from “stable” to “positive”.

Report By: Prasanna C. Rodrigo, Email him on: news360@sltnet.lk

Sri Lanka Offers US$100mn Bonds with LIBOR + Premium as Fitch and Standard & Poor's Raised Sri Lanka's Rating Outlook

15th March 2010, www.lankabusinessonline.com

Sri Lanka is offering 100 million US dollars in two and three year floating rates bonds, paying interest every six months mainly targeting the domestic market with bids closing on March 18, the government's debt office said.

The government's debt office, which is a unit of the Central Bank, said it is offering 50 million US dollars each in 2 year and 3-year bonds which will pay a coupon based on the 6-month London interbank offered rate (LIBOR) plus a risk premium.

The bonds are tax-free and can be bought by foreign investors and local firms that can have foreign currency assets with approval from the state investment promotion agency.

Bids opened on March 12, the debt office said.

In 2010 Sri Lanka is also hoping to go for a longer tenor 500 million US dollar sovereign bond.

The bonds have been popular among Sri Lanka's banks and other investors.

Sri Lanka last sold 2-year bonds in August 2009 at 4.50 percent above LIBOR. The last 3-year sale was 4.25 percent above LIBOR in September 2009.

But analysts expect risk premiums to come down sharply this year.

In October 2009 both Fitch and Standard & Poor's raised Sri Lanka's rating outlook.

Sri Lanka is rated 'B+' with 'stable' outlook by Fitch and 'B' with a 'positive' outlook by Standard & Poor's.