Moody's says SL faces significant credit impact from Ditwah

MOODY'S Investors Service has warned that the recent climate-driven natural disasters across South and Southeast Asia pose its most significant credit impact for Sri Lanka because of the country's limited fiscal capacity and high vulnerability to physical climate risks.

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In a 5 December dated statement Moody's said: "Since mid-November, countries in South and Southeast Asia have been pummelled by several tropical cyclones which, combined with unusually heavy monsoon rains, have caused severe flooding and landslides, and the tragic loss of hundreds of lives."

The agency added: "The economic, fiscal and credit impact of the disaster is likely to be most material for Sri Lanka (Caa1 stable)."

Moody's places Sri Lanka in a group of highly exposed countries, noting that Sri Lanka, as well as Indonesia (Baa2 stable), the Philippines (Baa2 stable) and Vietnam (Ba2 stable) all have high credit exposure to physical climate risks.

"Sri Lanka has much weaker fiscal capacity to increase its resilience than its neighbours." These conditions, Moody's says, heighten the consequences of the current disaster for a sovereign still navigating post-default stabilisation.

The agency also connects climate risk outcomes to institutional capacity.