Sri Lanka’s political uncertainty is likely to hinder progress in obtaining external financing – Moody’s

Protracted political uncertainty in Sri Lanka is likely to hinder progress in obtaining external financing
from key development partners or attracting foreign direct investment, or both to repay external debt maturities, Moody’s Investor Services warned.

With Sri Lanka’s cabinet, with the exception of President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa, tendering their resignations, along with the governor of the central bank, the difficult political environment could also weigh on policymaking and the economy’s recovery, Moody’s said.

Further, it also warned that the difficult political environment could also weigh on policymaking and the economy’s recovery from the pandemic, compounding challenges to fiscal consolidation and government efforts to shore up reserves to service its external debt obligations.

Intensifying social unrest and sporadic curfews are also likely to further strain the tourism industry, delaying the recovery in tourism receipts that were a crucial part of the government’s plans to bolster foreign-currency inflows before the pandemic.