International credit rating agencies Standard & Poor’s (S&P) and Fitch lowered Sri Lanka’s national credit rating, which temporarily suspended repayment of external debt amid the worst economic difficulties, to the level just before default.
According to Bloomberg News on the 13th (local time), S&P downgraded Sri Lanka’s national credit rating to “CC,” the third from the bottom, and presented the outlook as “negative.”
Sri Lanka’s external debt amounts to about $51 billion, but its foreign currency reserves stood at only $1.93 billion as of the end of March.
According to an analysis by JP Morgan Chase and others, Sri Lanka’s external debt to pay back this year is $7 billion and $25 billion for five years.
Sri Lanka’s economy, which focuses on the tourism industry, faced the worst situation as it suffered the COVID-19 pandemic following the Easter terror in April 2019 with a lot of external debt accumulated due to the one-on-one (land and sea silk road connecting China-Central Asia-Europe) project with China.
The government increased the amount of money and implemented import regulations and tax cuts to save people’s livelihoods, but the public sentiment turned around as the situation worsened, with prices soaring and foreign currency shortages.
The Sri Lankan government has declared a state of emergency as anti-government protests intensified, and is attempting to deal with the situation with the resignation of the Cabinet, but angry public sentiment has rarely subsided.
Opposition parties and others say President Gotabaya Rajapaksa should step down to take responsibility for the economic crisis.
