Accordingly, Moody's downgraded Sri Lanka from Caa1 to Caa2 in its credit rating.
It said the external liquidity risk for the Sri Lankan government would remain high over the next few years and that the rating was part of a review launched on July 19.
Accordingly, Sri Lanka has come close to bankrupt states.
However, the Central Bank of Sri Lanka responded by saying that Moody's had reached this assessment at the wrong time.
The Central Bank has also expressed regret over the report, which challenges the country's economic viability at a time when the Sri Lankan government is preparing to present its budget.