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Rating agencies cannot announce a nation’s exit from bankruptcy: Economic experts  

By: Staff Writer

June 25, Colombo (LNW): The task of the rating agency is to upgrade or downgrade a country’s sovereign ratings but not the declaration of bankruptcy or exiting from it as  mentioned by some opposition politicians to mislead the people of Sri Lanka, a former treasury secretary and an ex Central Bank governor claimed with in depth knowledge relating to functions of international rating agencies.

They noted that these rating agencies are used to publish ratings by considering the statements of the country’s finance ministry on the fiscal situation and thereafter making their assessments to assign ratings by upgrading or downgrading Sri Lanka’s international sovereign rating.

These ratings will be issued after the assessment of the actual fiscal performances of the state and the outcome of the measures to revive the economy and they have no authority to make announcements about a country’s debt negotiation outcome.

It is unbecoming for local politicians  to make public false statements aiming that it is the rating agencies that should announce that a nation has come out of bankruptcy

Sri Lanka has to have triple c rating to come out of bankruptcy. Besides, Sri Lanka has not reached an agreement with ISB holders. Therefore, how can one say our country has come out of bankruptcy?” they questioned.

These politicians should accept the fact that the authority to make such announce moments of exiting from preemptive debt default or freedom from bankruptcy is the head of state bit not the rating agencies.   

A credit rating agency (also called a ratings service) is a company that assigns credit ratings, which rate a debtor’s ability to pay back debt by making timely principal and interest payments and the likelihood of default.

An agency may rate the creditworthiness of issuers of debt obligations, of debt instruments and in some cases, of the services of the underlying debt but not of individual consumers.

International rating agencies have authority to make unwarranted downgrade or upgrade the country sovereign ratings.

The internationally recognised rating agency has to wait to downgrade or up grade Sri Lanka as it is being constantly updated by Sri Lankan authorities on the latest developments in all sectors of the economy and imminent foreign exchange inflows.

With such measures, the external current account balance is expected to be maintained at growth supporting levels, thereby accommodating equity capital to the financial account through direct investment to the identified projects in the Colombo Port City and Industrial Zones, in addition to the expected monetisation of non strategic and underutilized assets.

Under this situation of positive economic indicators no credit agency will down grade Sri Lanka sovereign ratings the economic experts emphasized.   

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