The recent upgrade of Sri Lanka’s local currency rating from ‘Selective Default’ (SD) to CCC+/C by S&P Global Ratings reflects a more optimistic view of the country’s solvency, said Chamber of Young Lankan Entrepreneurs (COYLE) Chairman, Rasith Wickremasinghe.
“This upgrade follows the finalisation of a domestic debt restructure, including collaboration with superannuation funds (EPF/ETF) and the Central Bank.
“The completion of the first IMF review under the 48-month Extended Fund Facility marks a significant milestone, unlocking access to SDR 254 million (about US$337 million) to support economic policies and reforms.”
“Sri Lanka’s performance under the program has been deemed satisfactory, with the majority of performance criteria and indicative targets met by the end of June,” he said.
Sri Lanka’s economy currently grapples with the significant challenges presented by a complex financial situation unfolding in unprecedented ways.
“Despite these existing realities, we remain optimistic about the rising potential through collective efforts and shared objectives driven by the nation’s private sector, aiming to revitalise the economy.
“In the present circumstances, positive indicators emerge as macroeconomic policy reforms start showing concrete outcomes, signalling a promising phase of stabilisation in Sri Lanka’s economic landscape. Nonetheless, the path to recovery and inclusive growth relies on maintaining the ongoing momentum of these reforms,” Wickremasinghe said.
The publication of the Governance Diagnostic Report showcases a pioneering step, positioning Sri Lanka as the first country in Asia to undergo this IMF exercise. The commendable progress made by the authorities in restoring debt sustainability, raising revenue, and ensuring financial stability reflects a positive trajectory.
“Moving forward, a strong commitment to improving governance and protecting the welfare of the vulnerable will be crucial, laying the foundation for a resilient and prosperous economic future,” he said.
Examining Sri Lanka’s net general government debt, which currently exceeds 100% of GDP and is projected to persist until at least 2028, there are challenges ahead.
“Addressing concerns about long-term sustainability, potential positive shifts can be driven by factors such as nominal GDP growth, successful fiscal consolidation, increased revenue generation, current interest rates, and the positive impacts of future restructuring efforts,” Wickremasinghe said. “By navigating these aspects effectively, Sri Lanka has the potential to enhance its fiscal outlook and achieve more favorable outcomes in the coming years,” he said, quoting Fitch Ratings.
