Sri Lanka govt US$3bn debt refinancing challenging: Moody’s

ECONOMYNEXT – Sri Lanka’s government could face risks in refinancing its three billion US dollars of foreign debt in the next five years, especially if investor sentiment changes, Moody’s Investors Service said.

“Domestic and external obstacles pose challenges to Sri Lanka’s refinancing of government debt,” the rating agency said in a new report.

Potential for sudden shifts in investor sentiment could affect the availability and cost of funding sources, it said.

The terrorist attacks of April 2019, in which suicide bombers killed over 250 people, including tourists,  will hurt tourism, curbing already-soft GDP growth, and further straining public and external finances, the agency said.

Moody’s Investors Service said that Sri Lanka, rated B2 with a stable outlook, faces numerous domestic and external obstacles that will pose challenges to the government’s ability to refinance its large upcoming debt obligations.

 “The primary challenge facing Sri Lanka is its large external debt refinancing needs over the next five years, with over $3 billion principal payable annually on external government debt over 2020-2024,” said Matthew Circosta, a Moody’s Analyst.

“While a range of financing options, including international dollar bond issuance and loans from bilateral and multilateral lenders, could support refinancing, the government is highly vulnerable to sudden shifts in investor sentiment that could affect the availability and cost of these funding sources,” said Circosta.

Moody’s said lower tourism arrivals and spending following the April 2019 terrorist attacks will hit GDP growth and add further pressure to public and external finances.

“Political tensions could also resurface before and after the presidential elections scheduled for late 2019 and the parliamentary election in 2020, with the potential to interrupt reforms and undermine investor confidence.”
 (COLOMBO, 20 JUNE, 2019)
 

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