Sri Lanka calls S&P bank warning ‘factually incorrect’

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(Srilankamirror) – Sri Lanka on Thursday dismissed a warning from the Standard & Poor’s rating agency about the island’s banks as “factually incorrect, illogically analysed and highly contradictory,” AFP reports.

The Central Bank of Sri Lanka said it was “gravely concerned” about S&P giving the country an “eight” in its Banking Industry Country Risk Assessment (BICRA) on a scale of one to 10, with 10 being the highest risk.

“Our economic risk score of ‘eight’ for Sri Lanka reflects a ‘very high risk’ assessment of economic resilience and credit risk in the economy, and a ‘high risk’ assessment of economic imbalances,” S&P said in a statement.

The rating grouped Sri Lanka with countries including Nigeria, Tunisia and Kazakhstan.

“The Central Bank of Sri Lanka wishes to assure the public that the Sri Lankan banking system is sound and resilient and is not prone to high risk as indicated in the statement of Standard & Poor’s,” the bank said.

The bank’s reaction came as it announced a $1 billion bond to be underwritten by Bank of America, Merrill Lynch, Barclays Capital and HSBC.

It gave no details, but official banking sources said the money would partly go towards repaying the country’s first sovereign bond of $500 million, which matures in October, as well as funding new government spending.

Sri Lanka’s economy grew 8.3 per cent last year, up from 8.0 per cent in 2010 as the country emerges from decades of ethnic conflict after the military’s defeat of the Tamil Tiger rebels in May 2009.

Sri Lanka has acknowledged a balance of payments crisis after a trade deficit of $10 billion last year.

Earlier this year, it revived a suspended $2.6 billion IMF bailout and is set to seek another $500 million in loans to build reserves.