News Today: Moody’s Credit Rating Agency Upgrades Sri Lanka

Moody’s Credit Rating agency has upgraded Sri Lanka’s long-term foreign currency issuer rating from Ca to Caa1, confirming a stable outlook. This significant upgrade reflects improved credit fundamentals and comes following the successful restructuring of the nation’s international bonds.

The debt overhaul, valued at USD 12.55 billion and approved last week by private sector creditors, has significantly reduced Sri Lanka’s default risk on both new and future issuances. Moody’s latest rating concludes a review initiated on November 28, 2024, where an upgrade was anticipated.

According to Moody’s report, Sri Lanka’s current rating at Caa1 is supported by a reduction in external vulnerability and government liquidity risk. It highlights enhanced prospects for fiscal and debt sustainability driven by ongoing reforms under the Government’s programs in collaboration with development partners like the International Monetary Fund (IMF). Moody’s also recognized Sri Lanka’s governance improvements, which underpin its ability to implement these reforms effectively.

The stable outlook suggests that risks to the rating are balanced. On the positive side, continued government reforms may strengthen Sri Lanka’s credit profile, paving the way for potential future upgrades. This milestone marks a recovery from the country’s historic foreign debt default in May 2022, which was triggered by high debt levels and dwindling foreign exchange reserves.

The Fitch Ratings agency also recently upgraded Sri Lanka’s long-term foreign currency default rating to CCC+ from Restricted Default, signaling growing confidence in the nation’s economic recovery.