Country risk in Sri Lanka is high with an OECD country credit grade of 6. This is akin to a speculative grade sovereign rating, which indicates an elevated risk of Sri Lanka being unable and/or unwilling to meet its external debt obligations. But economic reforms under the IMF program are a positive for Sri Lanka’s rating.
The World Bank gives Sri Lanka an ease of doing business rank of 111 out of 190 countries. Sri Lanka lags most of the region across the various ease of doing business indicators. But trading across borders, protecting minority investors and starting a business are easier in Sri Lanka.
Sri Lanka outperforms the regional average on the World Bank’s various governance indicators. But it is still in the bottom half on most measures and scores particularly poorly for voice and accountability, political stability and absence of violence. The UN completed its investigation into alleged war crimes at the end of the civil war and recommended a host of measures including a credible investigation into alleged war crimes. But progress has been slow.
The risk of expropriation in Sri Lanka is moderate, consistent with the governance scores around the control of corruption and rule of law.
Political risk in Sri Lanka is moderate. A peaceful transition of power at the last election and functioning democracy are positives. But recent bouts of violence against the Muslim community and the ensuing state of emergence could amplify political risks, particularly if it leads to sustained violence against ethnic and religious minorities.