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Sri Lanka's Central Bank says Moody's downgrade decision 'unwarranted'

Sri Lanka's Central Bank (CBSL) today criticised the downgrading of the country by Moody's Investors Service as "unwarranted". 

The decision "did not properly reflect the country's macroeconomic fundamentals" the CBSL added in a statement. 

"Such an action only on the premise of heightened political uncertainty, with no evidence of slippages in macroeconomic policies, cannot be justified."

Moody's yesterday downgraded Sri Lanka from B1 negative to B2 stable. 

The move, which is a significant blow to the Sri Lankan government’s economic policy, comes as both former president Mahinda Rajapaksa and Ranil Wickremesinghe claim to be Sri Lanka’s prime minister in a political crisis that has endured for several weeks.

“The decision to downgrade the rating to B2 is driven by Moody's view that ongoing tightening in external and domestic financing conditions and low reserve adequacy, exacerbated most recently by a political crisis which seems likely to have a lasting impact on policy even if ostensibly resolved quickly, have heightened refinancing risks beyond levels anticipated,” said the ratings agency.

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