Sri Lankan political standoff could threaten reforms: S&P Ratings
Oct 30, 2018 17:23 PM GMT+0530 | 0 Comment(s)
ECONOMYNEXT – Political uncertainty caused by the sudden dismissal of Prime Minister Ranil Wickremesinghe could threaten support for reforms and sound macroeconomic and fiscal policymaking, &P Global Ratings has warned.
It said in a statement that these factors are important given Sri Lanka;s debt repayment needs next year.
The full statement follows:
The escalation of political uncertainty in Sri Lanka following the dismissal of Prime Minister Ranil Wickremesinghe on Oct. 26, 2018, heightens the likelihood of the political environment becoming more fractious in the coming weeks, especially if no clear majority is established in parliament.
Our sovereign credit ratings and outlook on Sri Lanka (B+/Stable/B) remain unchanged at present, reflecting our expectation that Sri Lanka will maintain reform momentum, particularly on fiscal policy and debt management. If these conditions materially deviate from our expectations, they could have a negative impact on our assessment of the sovereign's credit quality.
The failure to reach a timely resolution to the current political uncertainty could erode the support for and implementation of sound macroeconomic and fiscal policymaking under the auspices of the IMF extended funding facility, thereby undermining creditworthiness. These factors are important in view of the heightened macroeconomic stresses Sri Lanka faces and the elevated external funding needs of the economy and the sovereign in 2019.
Prolonged political uncertainty could also threaten to derail the legislative agenda in Sri Lanka, especially on fiscal consolidation, and weaken the sovereign's market access when bond redemptions are set to rise. While we maintain our belief that the central bank and government retain sufficient resources to meet upcoming bond maturities, recent events could likewise complicate the sovereign's liability management strategy going forward.
(COLOMBO, 30 October, 2018)