Sri Lanka must create a conducive environment for rating upgrade: Semasinghe

• Says SL’s responsibility is to complete the debt restructuring process in all aspects
• Expresses confidence in creating an environment for upgrades
• Shares the reality that an upgrade won’t happen immediately

With the completion of three key steps in its debt restructuring— the finalisation of Domestic Debt Optimisation (DDO), inking agreements with the Official Creditor Committee and China Exim Bank, and reaching consensus with bondholders—Sri Lanka is now poised for a rating upgrade.

State Minister of Finance highlighted that while the next positive milestone is a rating upgrade, the island nation must work diligently to achieve this and shed its current default status.

“We cannot set a timeline for the rating agencies to update us. What we can do from our end is to create the environment for the rating agencies 
to look at. 

“So our responsibility is to create this conducive environment and complete the debt restructuring process in all aspects,” said State Minister of Finance Shehan Semasinghe.

Addressing journalists in a virtual press briefing on Friday, Semasinghe said that by doing so, the rating agencies will have appetite to look at within their criteria whether Sri Lanka is eligible for upgrading. 

“We are confident that we could make a conducive environment for the rating agencies to look at for upgrading. But as of now, that will not happen. But I’m sure the rating agencies will have different opinions on how upgradation should come, but we have certain other areas to be concluded,” he said, pointing out the ground reality.

Elaborating on the timelines, he explained a set time-frame cannot be specified since there have been certain instances where the expected resolutions have been reached before the set date.

“Certain timelines we have been able to extend after discussion bilaterally. No timelines were changed with unilateral decisions. It was always a bilateral decision. We consulted the relevant stakeholders and then adjusted the time. This was even with the IMF,” he shared.

Meanwhile, noting that certain rating agencies have a tracker, he pointed out that being outsiders such institutions can have any trackers they want.

“But you should practically get into this entire scenario and see how difficult it is. It is easier said than done,” said Semasinghe.

Sri Lanka is currently classified as restrictive default and selective default, where the island nation is not fulfilling part of its debt obligations.

Central Bank Governor Dr. Nandalal Weerasinghe in an interview recently said the initial priority is to resolve this situation and complete the restructuring process to exit these defaults.

“The success of this endeavour will determine our next steps. With swift action, we can swiftly progress to achieve credit ratings such as B, BB, or BBB thereafter,” he said.