Spotlight: Econ Op-eds in Summary (Week ended 28th October'20)
1. Moody’s concerns: Do politicians and advisors realise the critical situation? Part 1
By: Tudor Wijenayake
· The recent sovereign downgrade by Moody’s underscores many debt related struggles in Sri Lanka’s economy. The country has quite a lot of debt that is outstanding over the next few years, and the recent downgrade actually makes it more expensive to rollover this debt, and interest rates on Sri Lankan borrowings will increase.
· The government’s main response to this has been to depend on borrowing from allies such as India and China. However, response from India has been relatively muted, with an extended US$ 1 bn SWAP facility not seeing too much positive response. China has been more receptive, providing budgetary finance, but even this hasn’t been too large.
· Given the lack of success in such measures, as well as the geopolitics surrounding this, Sri Lanka would probably need to work with the IMF and address the country’s own budgetary troubles as well. While funding from the IMF has been delayed, working to shore up government finances could help. By addressing underlying issues, Sri Lanka might be able to successfully meet the challenging years ahead.
(Compiled by: Chayu Damsinghe & Malitha Gooneratne)
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