Debt moratorium for SMEs, credit negative for banks, unlikely to support economic recovery

Jan 20, 2020 (LBO) – Sri Lanka's debt moratorium for SMEs is credit negative for Sri Lankan banks and the sovereign because it risks increasing SMEs' risk appetite and relaxing their attitude toward debt repayments, Moody’s Investors Service said.

In an analysis, the service said that this move, in turn, will undermine banks' asset quality and constrain the sovereign’s credit profile.

On 13 January, the Central Bank issued guidelines on the debt moratorium for SMEs that the government announced in December last year.

Related: Central Bank issues circular to banks about new credit support scheme for SMEs

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