Sri Lanka post-election creditworth based on growth and trimming state debt: Moody’s

COLOMBO (EconomyNext) – Sri Lanka’s credit worthiness after presidential polls last week will depend on growth and how state debt will be managed, Moody’s a rating agency has said.

The rating agency said newly elected President Maithripala Sirisena’s came to power on a platform of governance reforms and ending corruption and promoting ethnic harmony, but whether he will "maintain or reverse current fiscal and investment policies is not apparent".

"We expect statements accompanying the appointment of the cabinet and a new central bank governor to offer clarity on the administration’s economic priorities over the next few days," the rating agency said.

Sirisena is hoping to push through constitutional reforms before parliamentary polls in April, analysts say.

There has also been concern expressed domestically about higher spending including state salaries and pensions and guaranteed prices including to export crops, amid a commodity price collapse in Sirisena’s manifesto.

The manifesto also promoted interventionism which could blunt citizen’s freedoms, ingenuity and intiatiave with state planning, critics say.

"Sri Lanka’s new president inherits a fast-growing economy, but one with a large government debt burden," the rating agency said.

State debt was at 78 percent of gross national product, was significantly higher than 41 percent median of B-rated countries like Sri Lanka. Interest payments consumed about 40 percent of state revenues.

About 43 percent of debt was denominated in foreign currencies, exposing the state to foreign currency risk.

Moody’s said Sirisena had said during campaigning that he would re-assess some large projects.





"How this translates into regulatory and foreign policy, particularly towards China, which has become the largest overseas investor in Sri Lanka, could determine the pipeline for investments, a vital driver of Sri Lanka’s post-war growth," the agency said.

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