SL among most exposed economies to interest rate shocks: Moody’s

„Shorter debt maturities and weak debt affordability key reasons „SL also among weakest economies in terms of fiscal strength „SL’S bunched up external debt repayments between 2019-22 estimated at US $ 15bn

Sri Lanka has been ranked among the most vulnerable economies exposed to interest rate shocks over the next four years, due to the relatively short average debt maturities and weak debt affordability, ahead of the country’s bunched up external debt repayments from 2019 to 2022, according to a Moody’s investor service report released yesterday.

“The sovereigns most vulnerable to an interest rate shock are generally low rated, with shorter maturities and weak debt affordability,” said Elisa Parisicapone, a Moody’s Vice Presidentsenior Analyst and co-author of the report.

“In our view, exposure to a shift in financing conditions is highest for Lebanon (B3 stable), Egypt (B3 stable), Pakistan (B3 stable), Bahrain (B1 negative) and Mongolia (B3 stable). Sri Lanka (B1 negative) and Jordan (B1 stable) are also highly exposed,” she said.

According to Moody’s, Sri Lanka’s interest to revenue ratio could increase by 5.3 percent and 10.4 percent over the next four years, from the current 35 percent, in a potential moderate or severe shock, compared with the 0.8 percent decline expected in the baseline.a potential moderate or severe shock could also limit the fall of debt to gross domestic product ratio to 4.0 percent and 2.4 percent, respectively over the next four years, compared to 5.6 percent in the baseline from 79.6 percent in 2017, the rating agency pointed out.