Sri Lanka officially ends debt default after Fitch upgrade

Colombo
Sri Lanka has officially exited its debt default, marking a significant milestone in the country's economic recovery. The announcement follows an upgrade of the island nation's credit rating by Fitch Ratings, which raised Sri Lanka’s long-term credit default rating to CCC+ from CCC- on Friday. This upgrade was attributed to the completion of the international sovereign bond restructuring and a positive outlook on macroeconomic indicators, reducing the risk of another default on local currency debt.

Mahinda Siriwardana, a senior official in Sri Lanka's Finance Ministry, hailed December 20 as a pivotal moment in the nation’s recovery. "This is a major milestone in our economic recovery process," Siriwardana stated. "Sri Lanka has officially exited sovereign default."

Sri Lanka’s economic crisis began in mid-April 2022 when the country declared its first-ever sovereign default since gaining independence in 1948. The crisis, exacerbated by shortages of essentials, fuel, and power, led to widespread protests and the eventual resignation of then-President Gotabaya Rajapaksa. His successor, President Ranil Wickremesinghe, quickly engaged with the International Monetary Fund (IMF) and secured a bailout in March 2023.

Despite the upgrade, Siriwardana acknowledged that the effects of the crisis are still felt by the public, highlighting that while the country has made substantial progress, the recovery has been difficult.

The government’s recent agreements with the IMF, including raising the tax threshold, reflect continued efforts to stabilize the economy, with the country awaiting the fourth tranche of the USD 2.9 billion bailout.