Reform policy implementation in Sri Lanka looks to “become slower and more challenging,” as “pressure for more populist policies” may rise as Sri Lanka enters an election cycle, said Fitch Ratings today.
“Recent political developments in Sri Lanka have created some uncertainty over reform momentum and fiscal consolidation, and prolonged upheaval could undermine investor confidence ahead of large external debt maturities in 2019-22,” said the agency in a statement released from Hong Kong.
Parliament was effectively suspended until 8 May upon resignation of coalition minsters,” it said.
“Large upcoming debt maturities and low reserve coverage make Sri Lanka vulnerable to shifts in global investor confidence, which could be affected by an extended period of political unrest or signs of waning commitment to the IMF programme,” added the Fitch summary.
The summary further noted that Sri Lanka had failed to meet IMF structural benchmarks it had agreed to complete by 2016.
Policy implementation looks likely to become slower and more challenging. Reform distraction s and pressure for more populist might also rise as Sri Lanka enters an election cycle. Fue and electricity price reforms to create automatic adjustment mechanisms were an IMF structural benchmark to be completed by end-2016,” the summary added.