Populist Agenda in Sri Lanka and Economic Impact

Measures by the newly anointed government headed by President Gotabaya Rajapaksa with elder brother Prime Minister Mahinda Rajapaksa also a two time President to provide tax relief have led to concerns by ratings agencies.

Fitch Ratings has revised the Outlook on Sri Lanka's Long-Term Foreign-Currency Issuer Default Rating (IDR) to Negative from Stable and has affirmed the IDR at 'B'.

While the new government has possibly revised the tax rates keeping parliamentary elections in April in view, where it hopes to exploit the current mood of the people to advantage, the impact on the economy is reflected in the downgrade by Fitch ratings.

"We believe the departure from the previous revenue-based fiscal consolidation path has created policy uncertainty and increased external financing risk for the sovereign, particularly given the large external debt repayments due in 2020 and beyond," the rating agency said in a statement. ...............

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