Domestic financing conditions have shown considerable improvement through spaces created and debt management strategies introduced recently.
Central Bank of Sri Lanka in a release said that this has reduced the roll-over requirement of Treasury bonds and SLDBs in 2019, 2020 and in the medium-term.
The Treasury bond maturities, which amounted to over Rs. 600 billion in 2018, are lower in 2019 and 2020, amounting to around Rs. 450 billion and Rs. 290 billion, respectively. Similarly, SLDB maturities, which amounted to around US dollars 2.3 billion in 2018, have also been reduced to around US dollars 0.62 billion and US dollars 0.82 billion in 2019 and 2020, respectively.
Further, the new acquisition of government securities by the banking sector has increased by only 1.5 per cent in 2018 as against the trend increase of around 5% in recent years. These developments along with resource availability among institutional investors highlight the substantial space that exists to meet financing requirements from the domestic market.
Continued fiscal consolidation, particularly with the positive primary balance and the Active Liability Management initiatives, are expected to further strengthen the government’s fiscal operations in 2019 and in the medium term.
CBSL is of the view that the decision by Moody’s Investors Service (Moody’s) on 20 November 2018 to downgrade the Government of Sri Lanka’s foreign currency issuer and senior unsecured ratings from B1 (Negative) to B2 (Stable) does not properly reflect the country’s macroeconomic fundamentals, and therefore unwarranted.
Given these parameters, the CBSL is of the view that the recent rating action by Moody’s is unwarranted. Such an action only on the premise of heightened political uncertainty, with no evidence of slippages in macroeconomic policies, cannot be justified.
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