Financial news and ratings from Sri Lanka: Low FE reserves affects ratings

Foreign T Bond holdings down 26%

Foreign holdings in T. Bond outstanding in the week ended Wednesday slipped by 26.2% week on week to Rs. 6,777 million. (Source: Central Bank)

Mahathir rejected IMF

In the backdrop of Sri Lanka seeking IMF assistance to the tune of US$ 1.9 billion to shore up its depleting foreign exchange reserves, the then Malaysian Premier Mahathir Mohamed at the height of the East Asian Financial crisis in 1997 refused the offered IMF assistance (which Thailand however accepted), but instead stabilized the Malaysian economy by pegging the ringgit to the US dollar, instead of allowing it a "free float."

Malaysia had a strong Bond market to raise money for development, Kingston Ng Jin Keng, Country Manager-Sri Lanka, RAM Holdings, a rating agency, told The Sunday Leader.

As such it was not dependent on international funding, he added. (See connected story found elsewhere on this page)

Bad to Worse

Sri Lanka's junk sovereign rating being downgraded by Fitch of London from "B+" to "B" primarily due to its commercial borrowing exposure recently may simply mean a bad rating becoming worse.

This is because there are 12 notches ahead of the "B+" rating. Ratings above "B+" are "AAA," "AA+," "AA," "AA-," "A+," "A," "A-," "BBB+," "BBB," "BBB-," "BB+," "BB" and "BB-."

Some of the ratings below "B+" in descending order are "B," "B-," "C" and "D."

A country such as China has an "A" rating, India: "BBB," Pakistan: "CCC+," Singapore: "AAA" and Malaysia: "A-."

Tourism

Malaysia gets 22 million tourists, but Sri Lanka only 500,000; however the potential for tourism in Sri Lanka is immense, Kingston Ng Jin Keng, Country Manager-Sri Lanka, RAM Holdings, a rating agency, told The Sunday Leader.

Its proximity to India was another plus.

However for that to happen peace is sine qua non, he said.