Business

Ill-timed and unacceptable rating action by Moody’s renews concerns of subjectivity – CBSL

Published

4 years ago

2021/10/29

A recent rating action by Moody’s Investors Service (Moody’s) on the Sri Lankan economy reflects, among other things, “serious governance weaknesses of such agencies, where they systematically overlook positive developments and expectations in emerging economies, but attribute much greater weight to downside risks. The ill-timed and unacceptable rating action by Moody’s renews concerns of subjectivity, the CBSL said in a statement.

Extracts of the statement:

The Government of Sri Lanka (GOSL) wishes to express strong displeasure on the recent assessment by Moody’s Investors Service (Moody’s) that led to the rating action, after being placed under review for downgrade three months ago in a similar fashion. Once again, Moody’s irrational rating action with regard to Sri Lanka comes a few days before a key event, namely the announcement of the Government Budget for 2022, and this apparent hastiness and the view expressed during discussions with Moody’s analysts that the nature of the Budget is irrelevant to the financing plans of the Government clearly demonstrates the lack of understanding of such analysts.

It also reflects serious governance weaknesses of such agencies, where they systematically overlook the positive developments and expectations in emerging market economies, but attribute much greater weight to downside risks. Moody’s assessment has also failed to take into account the latest developments in strengthening the country’s external position through an array of measures, some of which have already yielded intended outcomes, as announced by the Central Bank of Sri Lanka (CBSL) on 26 October 2021. Moreover, the assessment exposes the rating agency’s ignorance on the well-established political stability within a democratic setup, when it claims about “governance weaknesses” and “challenging domestic political environment”, and its obvious insensitivity to the challenges faced by a country that is recovering from adverse external events without bringing pain to investors who have stood by Sri Lanka during various difficulties that the country has undergone in the past.

In addition to the six-month strategy articulated in the Road Map presented by the CBSL on 01 October 2021, Moody’s assessment has failed to recognise the medium to long term funding arrangements that are being finalised with various bilateral sources, which are due to be materialised in the near term. They include, among others, credit lines of several billions of USD from India and the Middle Eastern counterparts to procure petroleum; an arrangement for a large forex loan from a Middle Eastern nation as a bilateral long-term loan, and the proposals received for the syndicated loan arrangement that are being evaluated at present. In addition, a substantial amount of funds is expected from the already lined-up prioritised project loan related inflows to the Government. The recent discussions on bilateral currency SWAP arrangements with several central banks are also expected to provide the country with additional support in the near term.

Without considering such cashflows, any assessment on the repayment capacity of the Government carries prejudice. Rating action based on such biased assessment is unfair and detrimental to the country’s prospects, as Sri Lanka is emerging strongly from the adverse effects of the COVID-19 pandemic. Needless to say, such action by an international rating agency calls into question the validity of its advice to the investor community. Nevertheless, it is clear that international investors have continued to put faith in Sri Lanka’s plans for recovery, as repeatedly reflected in their preference to hold Sri Lanka’s International Sovereign Bonds (ISBs) to maturity, despite claims by Moody’s about a heightened risk of default by Sri Lanka.

The GOSL is in the process of preparing its Budget for the forthcoming year to be presented on 12 November 2021 with economic activities returning to near normalcy, and the country is already experiencing strong signs of revival of tourism and other activities that generate non-debt creating foreign currency inflows, including the monetisation of under-utilised non-strategic assets. This untimely rating decision taken prior to the Budget shows that Moody’s has not taken all the relevant information to form its assessment of the country’s performance and the expected path, into account. Even a layman would recognise that the Budget is an important statement for a country as it sets the tone for policy initiatives and structural reforms which could help alleviate the external challenges and improve fiscal settings in the near to medium term. Legitimacy of financing, in the form of an Appropriation Act, includes all foreign financing with a clear direction of the fiscal path. Therefore, it is surprising that Moody’s fails to provide due consideration to the forthcoming Budget, disregarding the vital information that would be released with the announcement of the Budget, in arriving at its rating action.

Such action by Moody’s is not new to Sri Lanka since Sri Lanka has experienced similar rating action by Moody’s several times in the past as well. For instance, Moody’s placed Sri Lanka on review for downgrade on 17 April 2020 right at the onset of the COVID-19 pandemic and just after the Government signed a Foreign Currency Term Financing Facility (FTFF) with China Development Bank (CDB), hindering the implementation of the arrangement and delaying fund receipts. The downgrade was effected on 28 September 2020, just ahead of the ISB maturity in October 2020. Further, Moody’s placed Sri Lanka under review for downgrade on 19 July 2021 whilst the CBSL was finalising a currency SWAP with the Bangladesh Bank and was about to repay a maturing ISB. Such questionable action generates credibility considerations as to whether Moody’s actions are driven by economic considerations only.

The GOSL and the CBSL are closely engaging with all stakeholders, including the international investor community. Such engagements have helped clear any doubts of investors on the Government’s willingness and the ability to honour all upcoming debt service obligations, as it has done throughout history. The Sri Lankan economy has demonstrated strong signs of broad-based recovery, with a real GDP growth of 8.0 per cent in the first half of 2021. The vaccination drive is progressing at full strength, covering over 60 per cent of the population with both doses and almost 100 per cent of the population over 30 years, thus providing confidence of a strong rebound in economic activity in 2022. With the revival in tourism and the fruition of efforts to strengthen foreign exchange earnings through merchandise exports, exports of services, worker remittances, as well as domestic and foreign investments, the medium term growth path is likely to be robust. Improving performance of merchandise and trade in services in a fairly short period of time has shown the economy’s ability to reach its potential despite misplaced fears raised by Moody’s. It is deeply disappointing that Moody’s seems to be attempting to derail this potential of the country by downgrading Sri Lanka’s rating based on a static methodology, which is irrational, particularly at the time of a global pandemic. The Government’s commitment towards fiscal consolidation through expenditure rationalisation would complement the gradual rise in government revenue with normalising activity, thereby narrowing the fiscal deficit, that has not been recognised.

Moody’s. The pro-growth reforms implemented by the Government has laid the foundation for a domestic production led export-oriented economy over the medium term, despite some adjustment costs in the transition. Ignoring such ability and commitment of the Government has led to ill-informed conclusions by Moody’s.

Against this backdrop, the Government wishes to re-assure all stakeholders, including the international investor community, that Sri Lanka remains committed to honouring all forthcoming obligations in the period ahead. The Sri Lankan authorities welcome direct engagement with investors and invite investors for regular one-on-one discussions without being distracted by such unfounded announcements by external agencies.

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Business

First Capital Holdings records Rs. 3.23Bn Total Comprehensive Income for 9M FY2025/26

Published

7 hours ago

2026/02/13

Thilina Walpola

First Capital Holdings PLC, a subsidiary of JXG (Janashakthi Group) and a pioneering force in Sri Lanka’s investment bank landscape recorded a Total Comprehensive Income of Rs. 3.23Bn for the nine months ended 31 December 2025, compared to Rs. 4.53Bn in the corresponding period of the previous year. For the third quarter of 2025/26, the Group reported a Total Comprehensive Loss of Rs. 0.17Bn, after accounting for a dividend tax expense of Rs. 0.41Bn.

The Group’s Net Income before Operating Expenses for the nine months of 2025/26 amounted to Rs.6.33Bn compared to Rs. 7.69Bn reported in the corresponding period of the previous year. Trading income was primarily driven by the Primary Dealer and Corporate Dealing Securities divisions, reinforcing the Group’s positioning across fixed income and equity market segments.

The Primary Dealer division reported a Profit after Tax of Rs. 1.64Bn for the nine months ended 31 December 2025 (1st nine months of 2024/25 – Profit after Tax of Rs. 2.45Bn). The results include trading gains on the government securities portfolio of Rs. 1.66Bn and net interest income of Rs. 1.41Bn (1st nine months of 2024/25 – trading gains of Rs. 3.18Bn and net interest income of Rs. 1.31Bn), reflecting movements in yields and trading conditions during the period.

The Corporate Finance Advisory and Dealing Securities division recorded a Profit after Tax of Rs. 1.86Bn for the nine months ended 31 December 2025 (1st nine months of 2024/25 – Profit after Tax of Rs. 1.94Bn). The business unit reported total trading gains of Rs. 2.33Bn on its equity portfolio, compared to Rs. 2.23Bn in the corresponding period of the previous year, supported by market participation and portfolio positioning.

The Wealth Management division reported a Profit after Tax of Rs. 78.1Mn for the nine months ended 31 December 2025 (1st nine months of 2024/25 – Profit after Tax of Rs. 90.1Mn). Assets under Management stood at Rs. 96.4Bn as at 31 December 2025, compared to Rs. 115.9Bn as at 31 March 2025, reflecting market conditions and client portfolio adjustments.

The Stock Brokering division recorded a Profit after Tax of Rs. 166.3Mn for the nine months ended 31 December 2025, compared to Rs. 39.5Mn reported in the corresponding period of the previous year, supported by increased trading activities.

Commenting on the Group’s performance, Rajendra Theagarajah, Chairman of First Capital Holdings PLC, stated, “The operating environment during the period was shaped by shifts in interest rates, capital market activities, and fiscal adjustments. Against this backdrop, the Group’s performance reflects the structural strength of its capital markets platform and its ability to generate income across multiple market cycles while maintaining financial discipline.”

Dilshan Wirasekara, Managing Director / CEO of First Capital Holdings PLC, said, “Our priority during the period was to manage each business line with a clear focus on risk, liquidity and execution. Improved performance in stock brokering and consistent contributions from corporate finance reflect our ability to respond to market conditions while aligning capital deployment with client and market opportunities.”

Business

Keells Nexus introduces an all new Loyalty App

Published

7 hours ago

2026/02/13

Thilina Walpola

Keells is set to usher a new chapter in customer experience with the relaunch of Keells Nexus with the introduction of its all-new loyalty app on 13th February. For 25 years, Keells Nexus has been at the heart of Sri Lankan retail, pioneering coalition loyalty and even introducing mobile-based loyalty as early as 2014. The loyalty program is building on this legacy, combining state-of-the-art technology with richer, more personalized rewards and seamless integration across the Keells ecosystem with an intuitive mobile experience.

Today, Keells Nexus stands at over 2 million registered members, a reflection of the trust customers place in Keells and the brand’s commitment to improving the quality of life for the nation. The launch further strengthens Keells’ long-standing focus on tech-enabled retail efficiency, following innovative retail experiences to customers such as self-checkout counters and retail technology that drives efficiency such as advanced inventory management systems.

The new app therefore is the next logical step in this journey, bringing together rewards, offers, and account visibility in one intuitive, streamlined interface. The new Keells Nexus app brings together all deals, savings and partner offers in one place, giving customers complete visibility and control. Members can track their points in real time, scan a QR code at checkout to earn rewards instantly, and enjoy a more personalised, more connected shopping experience.

“At the heart of Keells Nexus is a simple but powerful belief that life is better when we’re connected,” said Nilusha Fernando Head of Marketing, Keells Supermarkets & Senior Vice President, John Keells Group.

Business

IDL, Clouds by SOZO and the Rukmini Tissanayagam Trust partner with the HSBC Ceylon Literary & Arts Festival 2026

Published

7 hours ago

2026/02/13

Thilina Walpola

The HSBC Ceylon Literary & Arts Festival 2026, taking place from 13 to 15 February at Cinnamon Lakeside, Colombo, promises to be one of those rare cultural moments that linger long after the last session ends. It is a gathering not only of writers, artists and thinkers, but of ideas, shared, challenged and celebrated in spaces where curiosity feels welcome.

The HSBC Ceylon Literary & Arts Festival 2026 is supported by several organizations through non-promotional CSR initiatives, including Clouds by SOZO and the Rukmini Tissanayagam Trust. International Distillers Limited contributes in a strictly neutral CSR capacity, providing logistical and resource support for the event without any brand promotion or product visibility.

The Festival celebrates Sri Lanka’s creative voice by showcasing literature, arts, and cultural talent from across the country. All supporting organizations participate solely in a philanthropic and educational role, ensuring that the focus remains on artistic expression and community engagement.

The Rukmini Tissanayagam Trust brings to the Festival a deep and enduring commitment to nurturing literature and the arts as essential pillars of society. Its work is driven by the belief that creative spaces are not optional additions, but vital platforms that shape how communities think, feel and engage with the world around them.

Speaking on this collaboration, Indhu Selvaratnam, Director of SOZO Beverages and Trustee

of The Rukmini Tissanayagam Trust, stated, “The Rukmini Tissanayagam Trust is delighted to partner with the Ceylon Literary Festival for the second time. We are deeply committed to enriching Sri Lanka’s intellectual and cultural landscape and admire the festival’s evolution in embracing literature, art, music, and initiatives that nurture emerging local talent. These efforts align closely with the Trust’s mission to support creative expression, and we look forward to continuing our support as the festival strengthens Sri Lanka’s global cultural presence.”

Adding a complementary dimension to this partnership is Clouds by SOZO, Sri Lanka’s premium mountain spring water brand, whose ethos of purity, sustainability and thoughtful living aligns naturally with the spirit of the Festival. Sourced from a pristine spring in the Knuckles mountain range, Clouds represents a return to authenticity, an idea that resonates strongly within creative and cultural spaces.

Speaking on the partnership, Dushyantha De Silva, Founder of SOZO Beverages (Pvt) Ltd, said, “The arts invite us to slow down, to observe, and to think more deeply, and Clouds comes from that same place of intention. Supporting the HSBC Ceylon Literary & Arts Festival is about being part of a space where ideas flow freely and thoughtfully. It’s a privilege for us to align with a platform that values creativity, dialogue and conscious choices.”

The HSBC Ceylon Literary & Arts Festival 2026 offers something increasingly rare: three uninterrupted days of ideas. Of language and imagination. Of conversations that do not require a screen to feel alive. It is a reminder of the power of gathering, of listening, discovering and engaging with perspectives that challenge and inspire.

As February approaches, the hope is simple: that more people choose to attend, to listen, and to support Sri Lankan creativity in all its forms. Because when a country invests in its writers and artists, it is not merely celebrating talent, it is shaping how it remembers, how it questions, and how it evolves.