Posted by Editor on December 21, 2024 – 6:00 pm
(Photo by Christoph Theisinger on Unsplash)
Sri Lanka officially exited sovereign default on December 20, 2024, signaling a significant turning point in its economic recovery.
Treasury Secretary Mahinda Siriwardena announced the achievement following Fitch Ratings’ decision to upgrade Sri Lanka’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC+’ from ‘RD’ (Restricted Default).
This marks the end of a challenging period for Sri Lanka, which began with its historic default in April 2022, the first in the country’s history and in the Asia-Pacific region in the 21st century. The crisis, described by Siriwardena as “man-made,” was attributed to policy missteps and a failure to address early warning signs.
The upgrade by Fitch reflects the completion of Sri Lanka’s complex debt restructuring process. This includes the international sovereign bond restructuring, where 98% of bondholders accepted new securities and the domestic debt optimization finalized in September 2023.
Fitch also raised the local-currency IDR to ‘CCC+’ from ‘CCC-’, citing reduced risks of further defaults and improved macroeconomic stability.
Siriwardena emphasized the collective efforts behind the recovery, crediting the Ministry of Finance, Central Bank, political leadership since April 2022 and advisors Lazard and Clifford Chance.
He also acknowledged the critical support from the International Monetary Fund (IMF), foreign governments, and creditors.
While celebrating the milestone, Siriwardena cautioned against repeating past mistakes. “Sri Lanka’s economic crisis shattered the expectations of 22 million people and negatively impacted future generations,” he said. He urged adherence to fiscal discipline, sound monetary management and sustainable growth strategies, warning against the “stop-go cycles” of the past.
“This achievement is a testament to the sacrifices of Sri Lankans,” Siriwardena stated, highlighting the importance of de-politicizing economic policy and reinforcing legal frameworks such as the Central Bank Act and Public Financial Management Act.
He called for inclusive and sustainable growth to create jobs and rebuild livelihoods, ensuring economic stability remains a priority. “The hard work and sacrifices have paid off. Sri Lanka now has an opportunity for a fresh start in the new year,” Siriwardena concluded.
This milestone reflects a painful but critical recovery journey, offering hope for a more stable and prosperous future for Sri Lanka.
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