News Line

    Go to Home Back
Email this to a friend
Printable version
Thursday, March 01, 2012 - 5.47 GMT
S&P rating downgrade highly unwarranted CB


Standard & Poor's revision of Sri Lanka's foreign currency rating outlook from 'positive' to 'stable' and lowering the country's long-term local currency rating from BB- to B+ at this juncture, is highly unwarranted, the Central Bank said yesterday.

Issuing a statement, the Central Bank said Sri Lanka's economy grew an estimated 8.3 percent in 2011, recording a growth of above 8 percent for the second consecutive year and the inflation remained in single digit levels for the last three years falling to a 2.7 percent this month.

The Central Bank predicted the inflation to continue to be at single digit levels in 2012, notwithstanding the recent adjustments to domestic energy prices and the debt to GDP ratio to improve to below 79 per cent in 2011, the lowest after 1981.

The Bank explained that it decided earlier this month to intervene in the foreign exchange market only to partially settle oil bills and the policy change depreciated the rupee 5.1 percent since February 9.

However, the Central Bank expects the depreciation of the rupee to have a contractionary effect on imports, while encouraging foreign fund inflows.
Foreign investments in government securities have already increased, with a net inflow of US$ 216 million during the period 9-29 February 2012, the Bank noted.
The Bank also expects the country's reserves, which is at US$ 57 billion now, to improve further during the year with the policy change.

Meanwhile, the IMF-SBA programme is progressing with plans of completing the 7th review towards the end of March 2012, the Bank revealed.

Explaining its decision to increase policy interest rates on February 3for the first time since 2007 and limiting the credit growth of commercial banks, the Central Bank said the deceleration in credit expansion will reduce the expenditure on imports and thereby reduce the trade deficit.

The increases in fuel prices and electricity tariffs are expected to improve the financial viability of the state-owned Ceylon Petroleum Corporation (CPC) and the Ceylon Electricity Board (CEB) helping the government to consolidate its fiscal position further.

With ongoing fiscal consolidation, the budget deficit in 2011 is estimated to be around 6.9 per cent of GDP, and is expected to decline further to 6.2 per cent in 2012.

The Central Bank pointed out that the government and the Central Bank have taken necessary measures to strengthen Sri Lanka's performance on the fiscal front, the monetary front and the external front.





Contact Information:: Send mail to with questions or comments about this web site.
Last modified: March 01, 2012.

Copyright 2008 Policy Research & Information Unit of the Presidential Secretariat of Sri Lanka. All Rights Reserved.