Sri Lanka credit outlook lifted by Moody’s

July 18, 2011 (LBO) – Moody’s Investors Service, a rating agency has lifted the outlook on Sri Lanka’s below-investment-grade ‘B1’ credit, to ‘positive’ ahead of a billion dollars sovereign bond sale. Road shows for the bond have already started.

The rating agency said the end of a long drawn out war which reduced political risk, lower inflation economic growth, budget reforms backed by a successful International Monetary Fund program and stronger reserves helped the upward revision.

Peace

“After the long-running civil war ended two years ago, Sri Lanka has started to reap a peace dividend that has accrued to the economy and the security environment,” Moody’s said.

“The economy is expected to grow sustainably at around 8 to 9 percent over the medium-term as confidence is further bolstered and investment picks up.”

Greater macroeconomic stability was seen in lower inflation after the war. The re-integration of the north eastern areas earlier Tamil Tiger separatists was also helping food supply.

“Re-integration of the Tamil minority in the war-torn northeast region is progressing, namely in the provision of humanitarian assistance and supporting development projec