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Moody's slams government's expropriation bill

International credit rating agency, Moody's Investors Service, slammed the government's expropriation bill on Monday, as "credit negative" and a move that will "increase investor uncertainty".

In a statement Moody's said,

"The government's seizure of assets creates ambiguity around the protection of private property in Sri Lanka,"

"Despite authorities' statement that this is a one-off move, the measure may undermine the predictability of future policies and increase investor uncertainty, which would make it credit negative for Sri Lanka."

“It is unclear, however, whether the assets will be managed by the state or resold to other investors, and how performance will be revived,”

"The use of the fast-track procedure, which we believe limits public scrutiny, largely reflects the tendencies of the current government to exert strong and direct influence over the economy."

“Maintaining investor confidence is key to Sri Lanka’s ability to continue to collect the peace dividend,”

“But an unintended consequence of this expropriation measure may be that it casts a cloud over the investment climate.”

Moody's also stated that the Supreme Court's ruling last week, legitimising the bill, was not consistent with Sri Lanka's constitution.

The comments came as Sri Lanka's stock market fell to a 26-month low.

See related articles:

SL struggling to revive state-owned businesses (13 Nov 2011)

Volumes down as bourse reacts to expropriation bill (11 Nov 2011)

Parliament passes expropriation bill (10 Nov 2011)

Supreme Court backs government's expropriation bill (08 Nov 2011)

Expropriation bill claims first victim (05 Nov 2011)

Sri Lankan Government to 'takeover 36 private companies' (01 Nov 2011) 

Asset expropriation bill expected to be passed soon (28 Oct 2011)