Fitch Ratings Upgrades Sri Lanka’s Credit Rating to ‘CCC+’

Fitch also raised Sri Lanka’s Local-Currency IDR to ‘CCC+’, up from ‘CCC-’, aligning it with the Long-Term Foreign-Currency IDR. The rating upgrade reflects the reduced likelihood of another default on local-currency debt, bolstered by the completion of the international sovereign bond restructuring in the latter half of 2023.

In September 2023, Sri Lanka concluded the local-currency portion of its domestic debt optimization process, involving the exchange of treasury bills and provisional advances held by the Central Bank of Sri Lanka into new treasury bonds and bills. This move has played a crucial role in stabilizing the country’s financial situation and has improved its debt sustainability outlook.

Despite the upgrade, Fitch noted that it does not assign an Outlook to sovereigns rated ‘CCC+’ or below, indicating the challenges Sri Lanka still faces in its path to economic recovery. The upgrade, however, represents a positive step forward for the island nation as it seeks to regain financial stability following a period of severe economic stress.

The move by Fitch is a sign of confidence in Sri Lanka’s efforts to restructure its debt and improve its economic fundamentals, although further challenges remain.