Moody's Investors Service (Moody's) has today placed the Government of Sri Lanka's Caa1 foreign currency long-term issuer and senior unsecured debt ratings under review for downgrade.

The rating agency said the decision to place the ratings under review for downgrade is driven by Moody's assessment that Sri Lanka's increasingly fragile external liquidity position raises the risk of default.

“This assessment reflects governance weaknesses in the ability of the country's institutions to take measures that decisively mitigate significant and urgent risks to the balance of payments,” the rating agency said.

Moody’s in late September, last year, downgraded Sri Lanka’s sovereign rating by two notches to Caa1 citing wide budget deficits, slow reforms and weak institutions.