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Sri Lanka holds sovereign bond issues after downgrade

Political turmoil in Sri Lankan contributed to a downgrade of its credit rating by Moody's

Sri Lanka has abandoned plans to raise money through sovereign bonds and will pursue badly-needed revenue elsewhere after Moody's downgraded its credit rating amid political turmoil, an official said Thursday.

President Maithripala Sirisena's economic advisor said "alternative finance" raised locally would service much of Sri Lanka's $4.5 billion in foreign debt repayments in 2019.

Lalith Samarakoon said the credit downgrade by Moody's on Tuesday would result in higher borrowing costs for Sri Lanka in the international markets.

He said Sri Lanka would seek to extend a $1 billion loan from China by an additional $500 million, but would only turn to international markets for cash "as a last resort".

"We have arranged certain other financing options such as raising $1 billion through state banks," he said.

Moody's said its decision was "exacerbated most recently by a political crisis which seems likely to have a lasting impact on policy even if ostensibly resolved quickly."

The South Asian nation has been gripped by an unprecedented political crisis since Sirisena sacked his prime minister on October 26 and appointed former strongman Mahinda Rajapakse in his place.

Sirisena dissolved parliament and called snap elections on January 5 but the legislature, restored by court order, voted twice to topple Rajapakse.

He has refused to step down, leaving Sri Lanka without a government since November 15.

The unrest also prompted the International Monetary Fund to suspend a tranche of a $1.5-billion bailout loan agreed to in 2016.