Fitch Ratings has elevated Sri Lanka’s credit rating to CCC+, citing the successful completion of all debt restructuring processes. This upgrade officially removes Sri Lanka from its “default” status. Experts anticipate that the remaining two global rating agencies will follow suit with similar announcements in the near future.
The decision reflects a combination of factors, including Sri Lanka’s recent robust economic growth, declining inflation, and enhanced banking sector stability. Political stability and the current administration’s steadfast commitment to the International Monetary Fund (IMF) program have also played pivotal roles in securing this upgrade.
Despite the progress, Fitch Ratings notes that interest expenditure as a percentage of government revenue is projected to decrease from 67% in 2021 to 42% by 2028. However, this figure remains significantly higher than the median value of 16% for countries within the CCC category. To secure further improvements in its credit rating, Sri Lanka must focus on increasing government revenues and further reducing interest expenses.
This milestone represents a promising step forward for Sri Lanka’s economic recovery, but sustained reforms will be critical to achieving long-term financial stability.
