SL buoyed by Moody’s rating upgrade
- Debt restructuring a key factor
- Govt’s commitment to fiscal reforms a positive
Moody’s Credit Ratings agency yesterday upgraded Sri Lanka’s long-term foreign currency issuer rating to Caa1 from Ca, confirming a stable outlook.
This upgrade by Moody’s comes in the aftermath of the conclusion of the restructuring of Sri Lanka’s international bonds held by private sector creditors approving a US$ 12.55 billion debt overhaul last week, which reduces the default risk on new and future issuances.
This latest rating announced by Moody’s brings to a conclusion a rating review the agency initiated on November 28, 2024 where a possible upgrading was on the cards. According to Moody’s report, Sri Lanka’s credit profile at Caa1 reflects the reduction in external vulnerability, government liquidity risk and prospects for fiscal and debt sustainability, from a weak starting point which are underpinned by ongoing reforms under the Government’s programmes with development partners including the International Monetary Fund (IMF). The Government’s willingness and capacity to implement reforms reflects on Sri Lanka’s governance which also underpin the rating action, according to Moody’s report.
The stable outlook reflects balanced risks to the ratings and on the upside, the Government’s commitment to and continued implementation of reforms may strengthen its credit profile beyond Moody’s current assumptions, to a level consistent with a higher rating, Moody’s report stated.
Moody’s latest report states that Sri Lanka’s credit fundamentals have improved over the past two years since the country had defaulted on its foreign debt for the first time in history in May 2022 due to its high debt burden and dwindling foreign exchange reserves.
This latest upgrading of Sri Lanka’s long-term foreign currency issuer rating to Caa1 from Ca by Moody’s Ratings comes in the backdrop of the Fitch Ratings agency raising Sri Lanka’s long-term foreign currency default rating to ‘CCC+’ from ‘Restricted Default’ last Friday (20).
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