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Sri Lanka is awaiting final IMF approval for its debt restructuring efforts, which is crucial for exiting the 'restrictive default' status and improving investor confidence.
The main challenges ahead include securing a credit rating upgrade, achieving long-term economic stability, and implementing structural reforms to boost fiscal health and support growth initiatives.
Sri Lanka is on the verge of exiting its ‘restrictive default’ status, which has deterred potential investors, thanks to crucial debt restructuring measures. The nation is now awaiting final approval from the International Monetary Fund (IMF) to confirm the negotiated terms with creditors. Fitch Ratings Lanka MD Maninda Wickramasinghe highlighted Sri Lanka's significant recovery progress, acknowledging the efforts made to overcome the economic crisis. He mentioned that once the restructuring of bonds and other outstanding bilaterals is completed, there would be no reason for rating agencies to maintain the restricted default status. Wickramasinghe emphasized the importance of learning from past mistakes to prevent future economic issues.
World Bank Lead Economist Gregory Smith and Senior Economist Dr. Indrajith Coomaraswamy echoed optimism but noted that exiting restrictive default is just the first step. The real challenge lies in securing a credit rating upgrade and achieving long-term economic stability. Smith stressed the need for substantial new investments by 2027 to repay the IMF, while Coomaraswamy emphasized maintaining macro stability, implementing structural reforms, and achieving a primary surplus target of 2.3 percent by 2025. Improving tax revenue administration and eliminating tax concessions are also crucial for boosting Sri Lanka’s fiscal health and supporting growth initiatives.
