Sri Lanka welcomes sovereign rating upgrade


* "The country has won the confidence of the world" – Basil
* CB expects further favourable results

Economic Development Minister Basil Rajapaksa and the Central Bank yesterday welcomed Fitch and Moody’s sovereign rating upgrade of Sri Lanka and stated that their confidence was built in measures taken towards the macroeconomic stability and improvement of the economy over the past several years would yield further favourable results in coming years.

Commenting on the recent decision by two major international rating agencies to upgrade Sri Lanka’s sovereign ratings, Economic Development Minister said that Sri Lanka has won the confidence of the world on its economic development policies and macroeconomic strategies. Moody’s Investors Service has changed the outlook on Sri Lanka’s B1 foreign currency sovereign rating to positive from stable.

"Moody’s Investors Service upgraded outlook of Sri Lanka’s B1 foreign currency sovereign rating from ‘Stable’ to ‘Positive’. Moody’s rating upgrade decision has been driven by the following key factors:

1. An increasingly evident peace dividend reflected in greater macroeconomic and financial stability.

2. A policy orientation of fiscal reform and economic growth, supported by a successful IMF program.

3. An improving external payments position.

4. A reduction in political event risk following the end of the civil war in 2009.

Fitch Ratings has upgraded Sri Lanka’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) to ‘BB-’ from ‘B+’. The Oubooks on both ratings are stable at the same time, the agency upgraded the Country Ceiling to ‘BB-’ from ‘B+’ and affirmed the Short-Term Foreign-Currency IDR at ‘B’.

"Fitch’s decision to upgrade the ratings has been based on the stabilization and recovery of the economy and increased efforts by the Government to bring down the budget deficit. Moody’s has commented that augmented investor confidence and increase in investments along with the falling inflation, the economy is expected to expand sustainably by eight to nine percent in the medium term.

The minister said "Both these world renowned rating agencies have expressed their confidence on outlook of Sri Lankan economy. Giving reasons for upgrading Fitch has said its decision reflects the stabilization and recovery of the economy and increased efforts to address the chronic budget deficit position.

"Moody’s view is greater Macroeconomic and financial stability, fiscal reforms and economic growth improving external payments position and reduction in political events risk following the end of the civil war in 2009 prompted it to revise these ratings-Even some big countries are facing debt problems these days. But Sri Lanka is well ahead of its targeted goals, growth rate inflation budget control and foreign exchange reserves."

"At the time when same disgrunted elements, both local and foreign, are trying to create a negative picture on Sri Lankan economy, Fitch and Moodys decision are welcome. Countries like Japan. Vietnam and Korea were in a desperate situation when their wars ended.

"These counties were able to recover only after 10 to 15 years after the end of the wars. The Marshall Plan was implemented after the Second World War to help war affected western countries. But Sri Lanka without such help was able to show strong performance in the economy within a short period of Lim after the war", he said.

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