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Sri Lanka Upgraded to CCC+ by Fitch
December 23, 2024
Sri Lanka was upgraded to CCC+ from RD by Fitch. The rating agency also upgraded the sovereign’s local currency debt to CCC+ from CCC-. The upgrade follows successful debt restructuring exercise with 98% participation from creditors. This deal restructures 96% of the country’s commercial external debt, converting 11 international bonds and past due interest into a mix of macro-linked, governance-linked, and PDI bonds, with options for rupee-denominated bonds. Sri Lanka is also restructuring debt with commercial and official creditors, including an agreement with international banks for $200mn, with official creditor restructuring expected by end-2024. The debt restructuring provides significant relief, with no foreign-currency bond maturities until 2029, and forex reserves expected to rise to $8.7bn by 2026. According to Fitch, Sri Lanka’s inflation has declined significantly, and its banking sector is improving, supported by economic reforms and reduced systemic risks. The election outcome in September 2024 is expected to support continued reforms, with the new government committed to implementing the IMF program.
Sri Lanka’s bonds were up by 2-3 points across the curve, with its 3.6% 2036s up at 75.3, yielding 8.38%.
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