Sept 22, 2010 (LBO) – 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 the 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.