July 08, Colombo (LNW): Following the completion of three critical steps in its debt restructuring—finalising Domestic Debt Optimisation (DDO), signing agreements with the Official Creditor Committee and China Exim Bank, and reaching consensus with bondholders—Sri Lanka is now on track for a potential rating upgrade, Finance State Minister Shehan Semasinghe said.
He emphasised that while the next goal is a rating upgrade, the country must work diligently to achieve this and move past its current default status.
“We cannot dictate a timeline for the rating agencies to update us. Our role is to create an environment conducive for the rating agencies to evaluate,” said Semasinghe.
During a virtual briefing on Friday (05), Semasinghe highlighted that creating this favourable environment and completing the debt restructuring process in all aspects is essential for the rating agencies to consider an upgrade.
“We are confident in our ability to create a conducive environment for the rating agencies to review. However, as of now, an upgrade is not imminent. The rating agencies have their criteria and timelines, but we have certain areas that still need resolution,” he asserted, acknowledging the current situation.
Explaining the timelines, he noted that a specific timeframe cannot be set, as there have been instances where expected resolutions were achieved ahead of schedule.
“Certain timelines have been extended after bilateral discussions. No changes were made unilaterally; it was always a mutual decision. We consulted the relevant stakeholders and then made adjustments, even with the IMF,” he explained.
Semasinghe also mentioned that while some rating agencies have their own tracking mechanisms, they must understand the complexities of the situation. “It’s easier said than done,” he remarked.
Sri Lanka is currently classified under restrictive default and selective default, indicating that the country is not meeting part of its debt obligations.
Central Bank Governor Nandalal Weerasinghe recently stated that the primary focus is to resolve this situation and complete the restructuring process to exit these defaults.
“The success of this effort will determine our next steps. With swift action, we can progress towards achieving credit ratings such as B, BB, or BBB,” he said.
