The Central Bank expressed positive sentiments about the Standard & Poor ( S&P) ratings for Sri Lanka saying it reflects the stability of the country’s economy in the face of many challenges.
Standard & Poor’s Ratings Services affirmed its ‘B+’ long-term and ‘B’ short-term sovereign credit ratings on Sri Lanka.
Speaking to ‘The Nation’, Central Bank Governor Ajith Nivad Cabraal said Sri Lanka’s retention of the ratings is a positive sign in a context where the US and the UK have been downgraded
Commenting on S & P’s warning of a bloated state sector and institutions lacking transparency and independence, Cabraal said was focused not on terms but on results.
“We identify the role that the state sector has to play in the country’s development. That does not mean that Sri Lanka’s economic performances are perfect. Like any other country, we also have many areas to work on. But, we are not too much bothered about the terms they have used to describe some aspects of our economy, “ he added.
If a country manages to retain its ratings, the CB Governor said that is a satisfactory achievement.
The S & P report said, “Additional rating constraints include the country’s fundamental fiscal weaknesses, and the attendant high government debt and interest burdens.”
Standard & Poor’s credit analyst Takahira Ogawa said “this is despite the government and the Central Bank having shifted their monetary and exchange rate policies to control the pace of credit expansion and reduce the country’s trade and current account deficits over the past year. We estimate its gross international reserves will stay at three months’ coverage of current account payments in 2013.”
“Although Sri Lanka’s inflation edged up to 9.8% in January 2013, we believe it will ease slowly this year, as the rupee stabilizes. Inflation has been in single digits since 2009. The rupee depreciation, price increases for electricity and fuel, drought, and floods pushed prices higher in 2012”
“In our view, the country’s growth prospects are favorable. We expect investment to climb toward 30% of GDP on continued reconstruction and other public investments,” Oragawa said in the report.
However, in early February, The Justice Department of the United States sued Standard & Poor’s Ratings Services, alleging that the firm ignored its own standards to rate mortgage bonds that imploded in the financial crisis and cost investors billions. It was the first federal enforcement action against a credit-rating firm over the US financial crisis.
In response to the US government’s reaction, the firm said it was being punished unfairly by the US government for “failing to predict” the housing meltdown or financial crisis.