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Sri Lanka resurrect plans for a sovereign rating, to cash in on foreign investor interest in the post tsunami era

Sri Lankan government has resurrected plans for a sovereign rating, to capitalise on the goodwill of foreign aid and investments that's flowing through, in the post-tsunami era. Sri Lankan government has resurrected plans for a sovereign rating, to capitalise on the goodwill of foreign aid and investments that's flowing through, in the post-tsunami era. A sovereign rating serves as an indication of a country's ability to repay its debt and is a key requirement to raise money from the international capital markets.

Successive governments have toyed with the idea of a rating, but two decades of ethnic war and subsequent politicking put the issue on ice.

The previous UNF government went to the extent of announcing that they would go for three ratings from international agencies – Fitch Ratings International, Moody's Investment Services and Standard's & Poor.

The island's Central Bank, which acts as the government's agent, also went ahead with plans to secure the services of a 'rating advisory', usually an investment bank, to help interact with the rating agency.

But the seams came apart when President Chandrika Kumaratunga pulled the rug out of her then Prime Minister.

"The present government is serious about the issue and has appointed a committee to look into obtaining a sovereign rating," Deputy Governor, Dr. Ranee Jayamaha told participants during an investor forum organised by HNB Stockbrokers on Friday.

Jayamaha, who also sits on the rating committee, said the first meeting was held last Tuesday.

"With the present situation of a lot of goodwill and support, we should be able to get a good rating," she said.

Fitch Ratings Lanka said last year that Sri Lanka’s sovereign rating is on par with its neighbour India, because of its record of fiscal discipline and never having defaulted on a payment.

Fitch put Sri Lanka's rating at between B-plus and BB-plus, in the same range as India, but below investment grade of BBB.

Sri Lanka's total debt as at end 2004 was Rs. 2.1 trillion or US$ 21.3 bn up from Rs. 1.9 trillion in 2003.

About 40 percent of loans are secured at concessionary rates from foreign donors.

Jayamaha also said the government was pushing ahead with plans to present several financial related laws, including bills for money laundering and amendments to the credit information bureau Act.

-LBO Newsdesk: LBOEmail@vanguardlanka.com

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