Moody’s changes outlook on Sri Lanka’s rating to negative from stable

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June 20, 2016 (LBO) – Moody’s Investors Service has today affirmed the government of Sri Lanka’s foreign currency issuer and senior unsecured sovereign ratings at B1 and changed the outlook to negative from stable.

Two key drivers underpin the change in outlook to negative from stable, Moody’s Investors Service said.

1) Our expectation of a further weakening in some of Sri Lanka’s fiscal metrics in an environment of subdued GDP growth which could lead to renewed balance of payments pressure.
2) The possibility that the effectiveness of the fiscal reforms envisaged by the government may be lower than we currently expect, which could further weaken fiscal and economic performance.

At the same time, Sri Lanka’s B1 rating is supported by the economy’s robust growth potential and higher income levels than similarly-rated sovereigns.

With the effective implementation of some of the fiscal policy measures and other structural reforms planned under the IMF programme, the government would be able to tap a significant potential revenue base, Moody’s said.

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