Moody’s has downgraded the government of Sri Lanka’s “long-term foreign-currency issuer and senior unsecured debt ratings to Ca from Caa2″, adding that its assessment reflects governance weaknesses in the ability of the country’s institutions to take measures that decisively address the very low adequacy of foreign exchange reserves.
“The announcement of the interim policy to suspend the servicing of external public debt after 5 pm Colombo time on 12 April 2022 will lead to a series of defaults on Sri Lanka’s international bonds with coupon payments due as soon as today,” Moody’s said.
Sri Lanka is barreling toward a “series of defaults” after deciding to stop paying its foreign debts, Moody’s Investors Service warned as it downgraded the country’s credit rating.
The island nation was cut to Ca from Caa2 by Moody’s on Monday, following similar downgrades by S&P Global Ratings and Fitch Ratings. An interest payment due Monday is the first since Sri Lanka’s government announced last week it would halt foreign debt service to preserve cash for food and fuel imports.
“Private sector creditor losses stemming from the eventual debt restructuring is likely to be material,” analysts Anushka Shah and Marie Diron wrote in a Monday statement.
“This assessment further reflects governance weaknesses in the ability of the country’s institutions to take measures that decisively address the very low adequacy of foreign exchange reserves and very weak debt affordability, thereby contributing to loss given default.”
Bloomberg & Various