The Central Bank of Sri Lanka (CBSL) yesterday (9) recognised Lanka Rating Agency Ltd. (LRA) as an acceptable credit rating agency.
Accordingly, LRA is now an acceptable external credit assessment institution, for the purposes of Banking Act Directions No.1 of 2016 on Capital Requirements under Basel III for licensed commercial banks, licensed specialised banks, and other related regulatory requirements pertaining to licensed commercial banks and licensed specialised banks.
The current Government of Sri Lanka (GoSL) has hit back at several rating agencies for their reviews on Sri Lanka and the decision to downgrade or review the country for a downgrade.
In July 2021, Moody’s Investors Service (Moody’s) announced the decision to place the GoSL’s Caa1 foreign currency long-term issuer and senior unsecured debt ratings under review for a downgrade.
This decision was prompted by Moody’s assessment that the acute tightening in global financing conditions, fall in export revenue, and sharp slowdown in GDP growth, as a result of the global coronavirus outbreak, has exacerbated Sri Lanka’s existing government liquidity and external vulnerability risks, raising risks of heightened financing stress and macroeconomic instability.
However, in response, the GoSL hit back at Moody’s Investors Service, stating that such an unwarranted announcement by Moody’s re-emphasises the need for the GoSL to revisit its relationship with rating agencies.
The Finance Ministry issued a statement, noting that it was surprised by the announcement made by Moody’s Investors Service, “at a time when the GoSL has diligently lined up adequate funds to repay its maturing foreign debt liabilities, including the International Sovereign Bond (ISB) maturing at end-July 2021”.
The Ministry further stated that the action taken by Moody’s could possibly create an uncertainty among the investors who have faith in Sri Lanka’s in-store banks and other investments, indicating that Sri Lanka would lose the existing investors due to the impact of the statement made by Moody’s.
Last month, Standard and Poors’ rating agency cut the rating outlook of Sri Lanka’s CCC+ rating to negative.
It was later learnt that the Finance Ministry’s response had been issued without the Minister’s knowledge. Finance Minister Basil Rajapaksa had in fact revealed this during a meeting convened at the Ministry. Treasury and Finance Ministry Secretary S.R. Attygalle, who was also at the meeting, had immediately apologised and vowed such incidents would not take place in the future.