Sri Lankan Credit Rating and Commercial Borrowing

Sri Lanka had applied for credit ratings from international agencies in its efforts to apply for loans from international markets in 2005 after the election of Mahinda Rajapakse as president. Standard and Poor's has rated Sri Lanka a "B+" speculative rating, four grades below investment grade. Fitch has rated Sri Lanka with "BB-" which is three grades below investment grade. Standard and Poor's maintains Sri Lanka is constrained by providing widespread subsidies, a bloated public sector, transfers to loss-making state enterprises, and high interest local and international burdens. Standard and Poor's estimates public sector debt has reached 95 % of GDP, in comparison to CIA estimates of 89 % of GDP [9]. Sri Lanka in mid-2007 sought to borrow $500 million from international markets to shore up the deteriorating exchange rate and reduce pressure on repayment of the domestic debt market. The head of the opposition UNP, Ranil Wickremasinghe has warned that such intense borrowing is unsustainable and will not repay these loans once elected to power.