Moody’s may upgrade Sri Lanka’s credit rating after bond exchange offer

Moody’s Investors Service announced it might raise Sri Lanka’s long-term foreign currency rating from ‘Ca’ following the government’s bond exchange offer.

This move is part of the country’s efforts to complete a $12.55 billion debt restructuring and stabilize its struggling economy.

The bond swap, launched on Tuesday, includes new U.S. dollar-denominated bonds provisionally rated ‘Caa1’, which is three levels above Sri Lanka’s current rating but still considered high-risk.

The government introduced innovative bond types, including macro-linked bonds (MLBs) and a governance-linked bond (GLB), alongside step-up and past-due interest bonds.

Experts see Moody’s decision to rate these bonds positively. “Rating the MLBs should boost trading liquidity after the exchange,” said Samy Muaddi, an emerging markets debt expert at T. Rowe Price.

Sri Lanka defaulted on its foreign debt in May 2022 amid a severe financial crisis, heavy debt, and dwindling foreign reserves.

The country’s USD bonds have since shown slight improvement, with the June 2025 issue rising to 65.875 cents on the dollar on Wednesday.

This development marks a step forward in Sri Lanka’s efforts to rebuild investor confidence and achieve economic recovery.

(Sourced from News Agencies)