Treasury Secretary Mahinda Siriwardana welcomed Sri Lanka’s exit from sovereign default and Fitch Ratings’ upgrade of the country’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC+’ on Friday. This milestone marks a critical step in Sri Lanka’s economic recovery.
“December 20, 2024, marked a major milestone in our economic recovery process as Sri Lanka officially exited sovereign default. This has been a long and difficult journey, comprising painful reforms and a very complex debt restructuring,” Siriwardana wrote on the social media platform ‘X’.
Fitch Ratings elevated the IDR from ‘RD’ (Restricted Default), citing reduced risk of another default on local-currency debt following the restructuring of international sovereign bonds (ISBs) and the improvement of macroeconomic indicators. The Local-Currency IDR was also upgraded to ‘CCC+’.
Fitch acknowledged the completion of Sri Lanka’s domestic debt optimization in September 2023, involving the exchange of Treasury bills and advances into new bonds. This development, combined with international bond restructuring, has significantly stabilized the financial outlook.
Siriwardana credited the achievement to collaborative efforts by the Ministry of Finance, the Central Bank, political leadership, and international advisers. He praised the International Monetary Fund (IMF), foreign governments, and creditors for their critical support.
“All the hard work and sacrifice, particularly by the people of Sri Lanka, has now paid off. Sri Lanka has the opportunity for a fresh start in the new year,” he said.
Reflecting on the crisis, Siriwardana emphasized the avoidable nature of Sri Lanka’s economic challenges, labeling them as a “man-made crisis.” He underscored the importance of fiscal discipline, sound monetary management, and adherence to fundamental economic principles to prevent future instability.
He called for sustainable growth measures to create jobs and rebuild livelihoods while avoiding the mistakes of the past, such as unsustainable fiscal and monetary policies.
Despite challenges, the upgrade signals hope for Sri Lanka’s future. Fitch noted that Sri Lanka’s debt-to-GDP ratio is expected to decline to about 90% by 2028, though the country still faces fiscal pressures above peers in the ‘CCC’ rating category.
“This is a historic moment and a time to celebrate – but it is a moment that should never be repeated,” Siriwardana concluded, urging the country to build on the hard-earned stability.
