Standard and Poor's announced a downgrade to Sri Lanka’s credit score this week, in another blow to the economy that sees the country on par with Argentina, Mozambique and Belize.
“Sri Lanka’s economy is suffering another major blow in 2020,” the ratings company said. “We lowered our ratings on Sri Lanka based on our assessment that risks to debt servicing capacity have risen, as the government’s access to external financing has become increasingly dependent on favorable business, economic, and financial conditions.”
In a statement released this week, the agency highlighted several areas of concern, noting that “recent changes to the constitution will likely further concentrate powers in the president, weakening checks and balances”.
“While the current administration’s clear victory in August’s parliamentary election is likely to ease such uncertainty over policy direction, further consolidation of power in the executive may increase institutional risks,” they added.
“This could affect the stability of the legislature or the judiciary system, and in turn, hit policy predictability and business confidence. Social stability could also be undermined, if divisions along religious or ethnic lines persist.”
Sri Lanka reacted by calling the move “surprising” and slammed the supposed “prejudicial approach” of the agency, “as in the case of recent rating actions by other international rating agencies without weighing the impact of alternative strategies of the Government”.
The action follows Fitch Ratings hitting Sri Lanka with a series of downgrades, as Colombo’s economic crisis deepened.