Moody’s Investor Services has expressed confidence that President Anura Kumara Dissanayake’s leadership will not disrupt Sri Lanka’s ongoing reform trajectory. The rating agency believes that the country’s appetite for economic reforms will remain intact, with only some reprioritization of policies.
Key Highlights:
- Reform Continuity: Moody’s expects that Sri Lanka’s ongoing debt restructuring and structural adjustments under the International Monetary Fund (IMF) programme will remain unchanged, despite the potential for minor policy adjustments.
- Fiscal Consolidation: Sri Lanka’s fiscal deficit narrowed from 11.7% of GDP in 2021 to 8.3% in 2023, supported by increased revenue collection due to reforms such as higher value-added tax (VAT) and corporate income tax rates.
- Debt Sustainability: Despite the improvements, debt affordability remains a concern, with interest payments expected to average 40%-50% of revenue over the next few years.
- External Position: The country’s foreign exchange reserves have strengthened to around USD 6 billion as of August 2024, sufficient to cover 3.5-4 months of imports.
President Dissanayake’s focus on tackling corruption, improving social welfare, and pursuing economic reforms signals his commitment to Sri Lanka’s fiscal and macroeconomic stability while maintaining dialogue with the IMF.
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Last modified: September 27, 2024
