Sri Lanka IMF disbursement credit positive: Moody’s

Apr 16, 2012 (LBO) - The resumption of a loan program with the International Monetary Fund is positive for Sri Lanka's 'B1' credit rating, as it will help boost investor confidence, Moody's Investors Service said. "The disbursement is credit positive because it will help restore investor confidence and shore up foreign exchange reserves, which had been drained owing largely to an ineffective exchange rate policy in the second half of 2011," Cynthia Mar, an associate analyst at Moody's sovereign risk group said in a weekly report.

"The reactivated IMF support program is also a tacit endorsement of Sri Lanka’s policy initiatives since February 2012, which were taken to stem currency and foreign exchange reserve losses, and which we also think will be effective."

The rating agency said corrective actions, including a flexible exchange rate, rate hikes, credit ceilings and energy price increase are expected to stabilize reserves.

With a 427 million US dollar tranche from the IMF reserves have reached 6.1 billion dollars, April 04, the rating agency said.

January reserves would not be enough to cover all external debt payments of 7.8 billion US dollars due this year should "should external lending