Moodys ratings downgrade unwarranted

1. Sri Lanka has been able to decisively deal with the domestic
spread of the COVID-19 pandemic, for which the country is hailed
as one of the few countries to have been able to do so…
Source: Coronavirus (COVID-19) Sri Lanka - Analytics Dashboard,
https://covid.iq.lk/; Epidemiology Unit (MOH)
Global Sri Lanka
Total Confirmed Cases 33,541,703 3,360
Deaths 1,006,072 13
Recovered 24,868,567 3,210
Active Cases 7,667,064 154
3
• Even during the islandwide
lockdown from mid-March to mid-
May, Agriculture activities,
financial sector, as well as
industrial zones continued
operations.
• Sri Lanka opened out all other
services and industries from May
2020.
• No citizen was left behind
• The General Election was held
• “Work-from-home” was widely
practiced

2. Sri Lanka, like many of its peers in the emerging
market group, experienced initial capital
outflows, exchange rate depreciation,
slowdown in activity, and pressure on
government finances, in response to the effects
of 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.
4

3. 0
200
400
600
800
1,000
1,200
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
US$million
Exports
2019 2020
Since May, merchandise exports have bounced back, & by July, had
returned to pre-COVID monthly averages of US$ 1 bn…
5
Sources : Sri Lanka Customs, Central Bank of Sri LankaNote: August 2020 figure is provisional

4. Sri Lanka recognised the probable external sector pressure early, and
decisively curtailed non-essential imports in order to prioritise external
debt service obligations…
0
100
200
300
400
500
600
700
800
900
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
US$million
Monthly Trade Deficit
2019 2020
6
Sources : Sri Lanka Customs, Central Bank of Sri LankaNote: Trade deficit for August 2020 is provisional
• By end December 2020, the cumulative trade deficit is expected to be US$ 5.8 bn
only, significantly down from US$ 8.0 bn in 2019.
• The savings on the import bill due to the curtailment of non-essential imports as well
as the significant reduction in the fuel import bill is expected to be over US$ 2.0 bn.

5. 0
50
100
150
200
250
300
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
No.ofTourists(‘000)
Tourist Arrivals
2019 2020
Source : Sri Lanka Tourism Development Authority
Although inbound tourist movements are yet not possible given
the global pandemic situation, other services exports, including
IT services and shipping, remain robust…
7
400
450
500
550
600
650
700
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
TEUs'000
Port Services – Container
Handling
2019 2020
Source : Sri Lanka Ports AuthoritySource : Central Bank of Sri Lanka
0
50
100
150
200
250
300
2017-Q1
2017-Q2
2017-Q3
2017-Q4
2018-Q1
2018-Q2
2018-Q3
2018-Q4
2019-Q1
2019-Q2
2019-Q3
2019-Q4
2020-Q1
2020-Q2
US$million
Inflows from Computer Services

6. 300
350
400
450
500
550
600
650
700
750
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
US$million
Workers’ Remittances
2019 2020
Workers’ remittances have recorded a sharp increase in spite of the
initial expectation of a slowdown…
8
Source : Central Bank of Sri Lanka
• At the current trends, the cumulative decline in workers’ remittances is likely to be
marginal, compared to the previous expectation of a decline of 15%.

7. 0
500
1,000
1,500
2,000
2,500
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2019 -
H1
2020 -
H1
US$million
Foreign Direct investments – Including Loans
FDI inflows have slowed, but the investment pipeline is strengthening…
9
Sources : Board of Investment, Central Bank of Sri Lanka
• FDI, which slowed in the first half
of the year, appear promising
looking ahead, particularly with the
expected inflows to the Port City
project and for new manufacturing
projects.
• The expected finalisation of new
legislation for the Port City within a
month will result in the realisation
of investment by those who have
already completed due diligence on
such investment.
• Other expected investments
include import alternative
industries as well as investments by
international financial institutions.
• FDI inflows during 2020 are expected to be over US$ 750 mn, which is only about
US$ 400 mn less than in 2019. At the start of the pandemic, FDIs were expected to be only around
US$ 300 mn for the year 2020.

8. 4,000
4,500
5,000
5,500
6,000
6,500 Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Indexpoints
Share Market Performance
ASPI - 2019 ASPI - 2020
Source : Colombo Stock Exchange
The stock market indices have improved dramatically to pre-COVID
levels, & are likely to gather further momentum…
10
Note: As at 28.09.2020
• Foreign inflows to the government securities market have already shown
signs of resumption, & according to initial responses, are likely to increase in
the coming months, particularly in the wake of the attractive SWAP
arrangement offered by the Sri Lankan authorities.
The ongoing
efforts toward
digitalisation
will also help
attract
investors, while
supporting new
plans to have
500 entities
listed by 2025
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Rs.million
Daily Turnover - CSE

9. With increased emphasis on domestic agriculture, agro-based industries
and resource-based industries, domestic economic activity has seen a
remarkable turnaround & recorded V-shaped recoveries…
0
2
4
6
2017
2018
2019
2020
MillionMT
Paddy Production
Maha Yala
Following a bumper Maha harvest, a bumper Yala
production of paddy is expected…
Industrial production has rebounded…
40
60
80
100
120
140
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Indexvalue
Index of Industrial Production
2019 2020
Electricity generation is steadily normalising, with
greater reliance on hydropower generation…
1,000
1,100
1,200
1,300
1,400
1,500
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
GWh
Electricity Generation
2019 2020
Construction sector has gradually gathered pace…
0
500
1,000
1,500
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
MT'000
Cement Availability
2019 2020 11
Source : Department of Census and StatisticsSource : Department of Census and Statistics
Source : Ceylon Electricity Board Source : Central Bank of Sri Lanka
Proj.

10. 170
175
180
185
190
195
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
LKR/USD
Monthly Average Exchange Rate
2019 2020
Source : Central Bank of Sri Lanka
The exchange rate has appreciated sharply since mid-April and remains
stable at appreciated levels, allowing the CBSL to accumulate reserves
through market purchases of foreign exchange…
12
Note: Average exchange rate for September 2020 as at 28.09.2020
Jan-19
Feb-19
Mar-19
Apr-19
May-19
Jun-19
Jul-19
Aug-19
Sep-19
Oct-19
Nov-19
Dec-19
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
-200
-150
-100
-50
0
50
100
150
200
USDmillion
Central Bank Net FX Purchases
Foreign inflows following the Moody’s
decision, enabled the Central Bank to
purchase US$ 30 mn from the forex
market on 29 September 2020.

11. Debt to GDP ratio, which increased in recent years is expected to
improve over the medium-term…
• By 2025, the debt stock is envisaged to be
brought down to below 70 per cent.
• Strategic initiatives to gradually reduce
foreign debt and cost of financing are already
beginning to yield results.
• During 2020, substantial savings from new
debt contracts in domestic financing have
been achieved with the significant reduction
in interest rates.
• Savings in the first eight months from T-bills and
T-bonds alone amount to Rs. 115 bn, and Rs. 200 bn
savings are expected with expected issuances and
other public debt contracts.
• Exchange rate stability also has impacted the
debt stock favourably.
• Average time to maturity is expected to
lengthen.
13
0
2
4
6
8
10
2017 2018 2019 2020 (Jan -
Aug)
Years
Issuance ATM of Domestic Currency Debt
T-bonds T-bills
0%
2%
4%
6%
8%
10%
12%
14%
2017 2018 2019 2020 (Jan -
Aug)
Percent
Weighted Average Yield Rate
T-bonds T-bills
Source : Central Bank of Sri Lanka

12. Financing inflows envisaged for 2020 favours domestic market
and strategic foreign financing…
Domestic market financing arrangements;
- Rs. 1,500 bn in Treasury bonds and bills, US$ 550 mn (Rs. 100 bn) in SLDBs, US$ 400 mn (Rs. 75 bn) in
FCBUs and other administrative sources such as the Government overdraft
Financing from foreign sources;
- Multilateral (World Bank & Asian Development Bank) and bilateral support expected to be around
US$ 1.2 bn
- Syndicate loans of US$ 500 mn from China Development Bank (CDB) in March 2020 and the second
tranche of around US$ 700 mn in October 2020
- Further initiatives of Alternate Bond issuances in SAMURAI/ PANDA markets of around US$ 500 mn
- Foreign investments in the rupee denominated Tbill/bond market of about US$ 500 mn envisaged.
Liquidity Facilitation arrangements;
- US$ 400 mn SWAP arrangement with RBI entered in August 2020 and a further US$ 1,000 mn is under
negotiation
- Ongoing Repurchase arrangement with the Federal Reserve Bank of New York
14

13. Foreign holdings in Treasury bills and bonds are likely to attract
a substantial volume of investments in coming months….
• Foreign holdings in Treasury bills and
bonds exceeded US$ 3,450 mn in
2014.
• Current holdings have a substantive
space for new investments.
• Recently introduced measures to
attrach foreign investors to the
government securities market and
the real economy through an
attractive foreign exchange SWAP
arrangement are likely to help attract
increased foreign currency inflows.
• Already, market inquiries are pouring
in for sizable investment volumes.
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
31/12/2012
12/31/2013
12/31/2014
31/12/2015
30/12/2016
29/12/2017
12/31/2018
12/31/2019
9/28/2020
US$million
Foreign Investments Outstanding
15Source : Central Bank of Sri Lanka
Net inflow
of US$ 10 mn
in Sep 2020

14. Official reserves of the CBSL increased to US$ 7.4 bn by
end August 2020…
• The recently introduced measures
to entice foreign investors to the
government securities market and
the real economy through an
attractive foreign exchange SWAP
arrangement are likely to help
enhance foreign currency inflows
• This is in addition to the support of
friendly countries, such as the
SWAP arrangement of USD 400 mn
with the Reserve Bank of India in
July 2020, and the expected
disbursement of the 2nd tranche
of the Foreign Currency Term
Financing Facility of US$ 700 mn
from the China Development Bank
in October 2020.
16
7.5
8.2
7.3
6.0
8.0
6.9
7.6
7.4
0
1
2
3
4
5
6
7
8
9
End2013
End2014
End2015
End2016
End2017
End2018
End2019
EndAug-
2020
US$billion
Gross Official Reserves
Source : Central Bank of Sri Lanka

15. Sri Lanka’s policy environment remains facilitative of enabling
high economic growth beyond the recovery phase while preserving
macro-economic stability…
• The public enterprise management improvements planned will be designed to
get to the 25th rank in “Doing Business” Indicators by 2025.
• The financial sector will be strengthened through a well designed
“Consolidation” programme.
• On the back of over 11 years of well anchored mid-single digit levels of
inflation, the CBSL has pursued an increasingly accommodative monetary
policy stance to deal with the Pandemic fallout.
• Fiscal policy, while remaining focused on supporting the economy, will return
to a path of consolidation to achieve a budget deficit of 4% of GDP as
envisaged in the Government’s policy framework, “Vistas of Prosperity and
Splendour”.
• Both fiscal and monetary policies have prioritised supporting people,
fostering businesses and reviving the economy, without jeopardising the
macro-economic balance of the country.
17

16. Our
Commitment to
our Investors
will be
deep and
unwavering…
• Sri Lanka re-affirms to foreign investors that it
remains willing and able to meet its debt
obligations, as it has done impeccably in the
past.
• All payment transactions for the repayment of
the International Sovereign Bond of US$ 1 bn
maturing on 04 October 2020 have already
been lined up, and funds are to be credited to
the paying agent’s account on 02 October
2020.
18

17. Instead of
understanding the
economic turnaround
as well as awaiting the
Budget that is due in
November 2020,
Moody’s downgrade of
Sri Lanka 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 end of the
internal conflict in 2009 and during the
political impasse at end 2018…
• In both instances, the rating actions
were proven to be hasty and erroneous,
and those actions only resulted in
several investors suffering unnecessary
losses and missing out on emerging
opportunities.
19

18. The Government will commence regular virtual
roadshows to strengthen investor relations following
the announcement of the National Budget in
November 2020.
• Those interactions will provide further clarity on the
Government’s medium term fiscal and financing plans, as
well as keep Investors posted on the progress relating to
the economic initiatives of the new Government.
20

19. 21
Hon. Ajith Nivard Cabraal
State Minister of Money,
Capital Markets &
Public Enterprise Reforms
Mr. S R Attygalle
Secretary to the Treasury
Ministry of Finance
Prof. W D Lakshman
Governor
Central Bank of Sri Lanka
stateminister@mo.treasury.gov.lk st@mo.treasury.gov.lk governor@cbsl.lk
• As in the past, any investor may approach the Ministry of Finance, the State
Ministry of Money and Capital Market and State Enterprise Reforms, and the CBSL.
• The highest level officials of these entities remain committed to facilitate any “one-
on-one” or collective discussions with investors…
Foreign investors are advised not to be dissuaded by the recent
unwarranted rating downgrade published in haste, but to be guided by
the improving economic conditions as outlined in this presentation…