Debt rollover chal­leng­ing for FMS amid ris­ing global in­ter­est rates: Moody’s

Daily Mirror (Sri Lanka) - - PROVINCIAL -

Just days after the World Bank said pos­si­ble plans by Sri Lanka to roll over its com­mer­cial debt or in­ter­na­tional sovereign bonds (ISBS) will be an up­hill task come ma­tu­rity, Moody’s In­vestors Ser­vice this week ex­pressed sim­i­lar con­cerns in an en­vi­ron­ment where global in­ter­est rates are ris­ing and liq­uid­ity get­ting tight­ened. In a re­port on fron­tier mar­kets (FMS) — high­light­ing the prospects and key risks — Moody’s showed how the FMS in the past have raised com­mer­cial US dol­lar sovereign bonds at rel­a­tively favourable rates when the global liq­uid­ity con­di­tions were be­nign.

But the rat­ing agency pointed out how the evolv­ing global liq­uid­ity con­di­tions and ris­ing in­ter­est rates now could pose “key credit chal­lenges” to FMS due to el­e­vated debt-ser­vic­ing costs and liq­uid­ity risks.

Ac­cord­ing to Anne Van Praagh, Moody’s Manag­ing Direc­tor, al­though “the abil­ity of in­di­vid­ual FMS to han­dle ris­ing in­ter­est rates and rollover of com­mer­cial debt is dif­fer­en­ti­ated”, she said, “vul­ner­a­bil­i­ties are high­est for those coun­tries where high lever­age com­bines with a con­strained abil­ity by do­mes­tic pol­i­cy­mak­ers to ease mone­tary pol­icy and pre­serve fis­cal flex­i­bil­ity”.

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