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Moody’s downgrade ‘unwarranted, erroneous suggesting reckless reaction’

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Government wades into battle with facts, figures and projections

In an extraordinary hard-hitting rejoinder to Moody’s downgrade of their Sri Lanka rating from B2 to Caa1 with a stable outlook, the Ministry of Finance, State Ministry of Money, Capital Markets and Public Enterprise Reforms (headed by former Central Bank Governor Ajith Nivard Cabraal) and the Central Bank accused the well-known rating agency of an “unwarranted and erroneous” finding that suggests a “reckless reaction.”

It said that “instead of understanding the economic turnaround as well as awaiting the Budget that is due in November, the downgrade of SL at the beginning of the Economic Revival is inexplicable.”

“This hasty rating action seems similar to the previous premature and reckless downgrades by rating agencies in the immediate aftermath of the ending of the internal conflict in 2009 and during the political impasse at the end of 2018. In both instances, the rating actions were proven to be hasty and erroneous, and those actions only resulted in several investors suffering unnecessary loses and missing out on emerging opportunities.”

“Moody’s rating downgrade fails to recognize and do justice to the ground reality of the ongoing rapid economic recovery backed by vastly improved business confidence arising from the return of political stability and policy stability after a lapse of five years,” the presentation said.

It went on to stress that Sri Lanka, like many of its peers in the emerging market group, experienced initial capital outflows, exchange rate depreciation, showdown in activity and pressure on government finances in response to the effects of the Covid-19 pandemic.

“But, the swiftness with which decisions were taken followed by the landslide victory of the government, enabled Sri Lanka to move along a recovery path towards growth and stability,” it said.

Since May, merchandise exports had bounced back, and by July, had returned to pre-Covid monthly averages of USD one billion, the presentation supported by graphs and charts said.

It argued that SL recognized the probable external sector pressure early, and decisively curtailed non-essential imports in order to prioritize external debt service obligations. The cumulative trade deficit by end December is expected to be around only USD 5.8 billion, significantly down from USD eight billion the previous year.

“The savings on the import bill due to the curtailment of non-essential imports as well as significant reductions in the fuel import bill is expected to be over USD 2.0 billion,” the presentation said.

Discussing the vital tourism sector, it said that although inbound tourist movements are yet not possible given the global pandemic situation, other service exports, including IT services and shipping remain robust. It added that workers’ remittances have recorded a sharp increase in spite of the initial expectations of a slowdown and at current trends, “the cumulative decline in workers remittances is likely to be marginal, compared to previous expectations of a decline of 15%.”

On foreign direct investment, it admitted that FDI inflows had slowed, but the investment pipeline is strengthening. While FDI slowed in the first half of this year (from a peak of USD 2,000 billion in 2018), looking ahead prospects were promising particularly with expected inflows into the Port City project and for new manufacturing projects.

“The expected finalization of new legislation for the Port City within a month will result in the realization of investment by those who have already completed due diligence on such investment,” the presentation said. “Other expected investments include import alternative industries as well as investments by international financial institutions.”

“FDI inflows during 2020 are expected to be over USD 750 million, which is only about USD 400 million less that in 2019. At the start of the pandemic, FDIs were expected to be only around USD 300 million for the year 2020.”

The presentation further said that stock market indices have improved dramatically to pre-Covid levels and are likely to gain further momentum. Also, foreign inflows to the government securities market have already showed signs of resumption and according to initial responses, are likely to increase in the coming months, particularly in the wake of the attractive SWAP arrangements offered by the SL authorities.

With increased emphasis on domestic agriculture, agro-based industries and resource-based industries, domestic economic activities have turned around remarkably and recorded V-shaped recoveries. A bumper Yala crop was expected to follow the bumper Maha. Industrial production has rebounded, electricity generation is normalizing with greater reliance on hydropower generation and the construction sector has gradually gathered pace.

The exchange rate had appreciated sharply since mid-April and remains stable at appreciated levels, allowing the Central Bank to accumulate reserves through market purchases of foreign exchange. Foreign inflows following the Moody’s downgrade enabled the Central Bank to purchase USD 30 million from the forex market on Sept. 29.

The presentation further said that the Debt to GDP ration which increased in recent years is expected to improve in the medium term; that envisaged financing inflows for 2020 favours domestic markets and strategic foreign financing; and that foreign Treasury bills and bonds holdings are likely to attract a substantial volume of investments in coming months.

Other positives outlined includes that official reserves of CBSL had increased to USD 7.4 bn. by end August 2020; a policy environment facilitating high economic growth beyond the recovery stage while preserving macro-economic stability and a “deep and unwavering commitment to our investors.”



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Laws to curb unauthorised constructions to be strengthened

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The President emphasised that no room will be given in the future for unauthorised constructions and that the laws relating to them will be strengthened. The President further pointed out that failure to do so would lead the country to face an even greater disaster.

President Dissanayake stated that a separate unit will be established under the Reconstruction Presidential Task Force, which is to be set up shortly, to formulate legal policies and that this will enable long-term solutions to these issues.

President Anura Kumara Dissanayake made these remarks on Sunday (07)  afternoon  while participating in the Special District Coordination Committee meeting held at the Kurunegala District Secretariat.

The President instructed the relevant authorities to restore all damaged provincial roads and local council roads in the Kurunegala District to full functionality and reopen them for public use within the next two weeks.

He further stated that the allocations already set aside for this purpose should be utilized and that any roads that cannot be completed before 31 December, along with the required allocations, should be reported. The necessary funds will be allocated for these in the 2026 budget.

The district has recorded damage to 1,181l  ‘A’ and ‘B’ grade provincial roads due to the disaster, along with 35 bridges, 162 culverts and one embankment. Detailed discussions were held on restoring them urgently.

The President separately reviewed the measures taken to restore essential infrastructure including electricity, water supply and communication facilities that had been disrupted in the district due to the disaster. He emphasised that delivering services up to the end user is the responsibility of the service-providing institutions and highlighted the need for strong coordination among these institutions to overcome existing obstacles.

Officials reported that 12,729 hectares of paddy land in the Kurunegala District were fully damaged due to the disaster, of which 7,215 hectares remain cultivable, while 5,514 hectares cannot be cultivated.

The President instructed the Water Supply Board to provide temporary water where cultivation is hindered due to lack of irrigation water and directed authorities to minimise the extent of uncultivable land as much as possible to ensure harvesting. He also inquired into the programme for supplying paddy seeds and fertiliser to farmers.

Damage caused to maize, vegetables and other supplementary crops, as well as the compensation process for affected farmers, was also reviewed.

The President informed local council Chairpersons that a main responsibility for well-cleaning activities lies with the local councils and instructed them to expedite the work with the assistance of the Tri-Forces and voluntary organisations.

Highlighting the need for maintaining accurate data on livestock farms across the country, the President pointed out that existing laws may be insufficient for this purpose and stressed the need to revise them. He also noted that the lack of proper registration of livestock farms causes issues when granting compensation and other assistance.

Therefore, the President instructed officials to bring all livestock-related data into a single system, review it and promptly make policy decisions regarding compensation.

There were also discussions on reviving the inland fisheries industry, healthcare requirements and the reopening of schools.

Extensive discussions were held on identifying land for resettlement and granting compensation for damaged houses. The President instructed that Divisional Secretaries must play a major role in compensation payments and resettlement activities.

Meanwhile, Venerable Aluthgama Mangala Thero, Chief Incumbent of Maddeketiya, Gokarella Sangamu Raja Maha Viharaya has allocated 20 acres of temple land for the resettlement of affected families. The relevant documentation was handed over to the President.

A financial donation of Rs. 10 million from the North Western Provincial Cooperative Societies, associations and members coordinated by the North Western Provincial Cooperative Development Department along with a donation from  S.M. Wasantha Samarakoon, owner of Gokarella Rice Mill, was also handed over to the President.

Minister of Public Security and Parliamentary Affairs, Ananda Wijepala, Deputy Minister of Agriculture and Livestock, Namal Karunaratne, Deputy Minister of Women and Child Affairs , Namal Sudarshana, North Western Province Governor, Tissa Warnasuriya, district MPs from both government and opposition, local council Chairpersons, Secretary to the Treasury, Dr Harshana Suriyapperuma , Ministry Secretaries, Kurunegala District Secretary, Chandana Dissanayake, senior government officials and security forces leaders were present on this occasion.

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627 confirmed dead, 190 persons missing as at 6:00 a.m. today [08]

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The Situation Report issued by the Disaster Management Center at 0600hrs on 8th December 3035 confirms that 627 persons have lost their lives due to floods and landslide that occurred in the island during the past few days. The number of persons missing was 190.

 

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Showers expected in the Northern, North-Central, Eastern and Uva provinces and Batticaloa and Ampara districts

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WEATHER FORECAST FOR 08 DECEMBER 2025
Issued at 05.30 a.m. on 08 December 2025 by the Department of Meteorology 

The Northeast monsoon conditions are gradually establishing over the island. Showery weather condition is expected to enhance over the Northern, North-central and Eastern provinces from tonight.

Misty conditions can be expected at some places in the Western, Sabaragamuwa, Central and Uva provinces during the early hours of the morning.

Showers will occur at times in the Northern, North-Central, Eastern and Uva provinces. Fairly heavy showers  above 50 mm are likely at some places in the Batticaloa and Ampara districts.
Showers or thundershowers may occur at several places in other areas of the island after 1.00 p.m.

The general public is kindly requested to take adequate precautions to minimize damages caused by temporary localized strong winds and lightning during thundershowers.

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