Sri Lanka riled by Moody's downgrading of economic outlook

Sri Lanka's Central Bank has rejected the down grading of its economy by a Singapore based rating agency as "ill advised" and "backward looking".
The Moody's rating agency had yesterday graded down the position of the the Sri Lankan economy to be 'stable' from being 'positive'.
"The latest move by Moody's of changing the outlook on Sri Lanka's B1 foreign currency sovereign rating from 'Positive' to 'Stable', is ill-advised and backward looking, and is not a proper reflection of the external position and the recent improvements in the Sri Lanka economy," said the Central Bank of Sri Lanka (CBSL) in a statement today.

On Moody's assertions on the external payment position, the CBSL said that the agency had disregarded the strong consolidation of international reserves in terms of standard reserve adequacy measures has taken place since June 2012, when Moody's reaffirmed Sri Lanka's Outlook as 'Positive'.
The CBSL said that Sri Lanka's external sector has performed satisfactorily in the first four months of 2013, with earnings from tourism continuing to grow with increasing recognition of Sri Lanka as an attractive tourist destination.
Workers' remittances continuing to rise, supported by the diversification of migrant destinations and further expansion of formal channels for remitting money it said.

"These developments show that Sri Lanka is on a clear path of fiscal consolidation, and hence, the Moody's statement that there is a slowdown in the pace of fiscal consolidation, is not justifiable" said the CBSL

They added that foreign investment at the Colombo Stock Exchange (CSE) continuing to grow, with increased activity at the CSE, indicating a gradual build-up of investor confidence.
At the same time, inflows in terms foreign direct investments are poised to record a historically high level of USD 1.8 billion, in 2013, with major projects that are already in the pipeline the CBSL added.
"With regard to Moody's assertion that there is a slower pace of fiscal consolidation, it needs to be highlighted that the Government has given a strong commitment to continue the fiscal consolidation process, by reducing the budget deficit each year since 2009," it said.

The budget deficit of Sri Lanka declined from 9.9 per cent in 2009 to 6.4 per cent in 2012.