Fitch Ratings has upgraded Sri Lanka’s Long-Term Local-Currency Issuer Default Rating (IDR) to ‘CCC-‘ from ‘RD’ (Restricted Default).
Fitch said in a statement that the Long-Term Foreign-Currency IDR has been affirmed at ‘RD’ and the Country Ceiling at ‘B-‘.
The Short-Term Local-Currency IDR was downgraded to ‘RD’ from ‘C’ following the exchange of treasury bills held by the Central Bank and subsequently upgraded to ‘C’ in line with the Sovereign Rating Criteria, as Fitch Ratings believes the local-currency debt exchange has now been completed.
Fitch noted that the upgrade of Sri Lanka’s Long-Term Local-Currency IDR to ‘CCC-‘ reflects the completion of the local-currency portion of Sri Lanka’s domestic debt optimisation (DDO) plan, launched in July 2023, following the exchange of the Central Bank of Sri Lanka’s (CBSL) treasury bills and provisional advance into new treasury bonds and bills on 21 September 2023.
It added the debt restructuring will lower Sri Lanka’s gross financing needs over the medium term, in line with the targets under the International Monetary Fund’s Extended Fund Facility, and support an improvement in the country’s debt metrics over time.
Fitch Ratings noted that the local-currency restructuring could accelerate progress towards the restructuring of external debt.
