The Central Bank (CB) on Friday rejected the downgrading of the country’s rating to ‘negative’ from ‘stable’ by rating agency S&P and said it would be compelled to review its relationship with this rating agency.
“The Sri Lankan authorities are deeply shocked to note the incredulous decision of S & P to downgrade Sri Lanka’s stable outlook to negative as from today. The authorities also consider the contents of the Rating Agency’s report as outrageous, arbitrary and biased, especially in the context of current favourable developments that are taking place in Sri Lanka,” the CB statement said.
In separate comments, CB Governor Ajith Nivard Cabraal said while the agency has a right to be independent, it should also consider the developments that have taken place including the end of the war.
“Look .. neither the money markets nor the stockmarket, which are buoyant, responded to this negative report. This shows they didn’t take the report seriously,” he said.
The CB said over the past few days, the country has received higher than normal foreign exchange inflows pursuant to the victory against terrorists. At the same time, this year’s private remittances have comfortably exceeded the trade deficit.
It said the exchange rate which stood at approximately Rs. 120 per US dollar recently, saw the rupee gaining and being pegged at Rs.115 per US dollar. “In that scenario, in order to support competitiveness, the Central Bank has been absorbing significant amounts of foreign currency from the forex market, which has resulted in the Central Bank building up its reserves rapidly,” it said.
The CB said it was incredible that S&P could have overlooked all these positive trends and signals. “It is also astonishing that S&P has taken the highly damaging stand of projecting the potential depreciation of the Sri Lanka rupee in its report. Such subjective and arbitrary comments are clearly unprofessional.
Such comments could only be due to the rating committee obviously misreading the real trends in the economy, or due to these viewpoints being expressed under pressure for reasons best known to them. It is also very strange that the S&P has taken the decision to downgrade the outlook, knowing fully well that the Managing Director of the IMF has already indicated that a resolution to the issue of the Standby Facility requested by Sri Lanka is being worked out soon,” the CB said.