Sri Lanka marked a significant milestone in its economic recovery journey on December 20, 2024, officially exiting sovereign default. Treasury Secretary Mahinda Siriwardena described this achievement as a turning point in the country’s efforts to rebuild its economy after a challenging period of reforms and debt restructuring.
Posting on X (formerly Twitter), Siriwardena reflected on the long and arduous path to recovery, following Fitch Ratings’ upgrade of Sri Lanka’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC+’ from ‘RD’ (Restricted Default). He described this as a “crucial milestone” and called on all Sri Lankans to contribute to the nation’s journey toward inclusive prosperity.
Lessons Learned
Siriwardena emphasized the importance of avoiding past policy mistakes rooted in dogmatic beliefs, ideological biases, and misleading narratives.
“The collapse happens rapidly, but the recovery is painful and difficult. I hope these lessons are engrained in our society as we reflect on this journey. This is a moment to celebrate but also a moment that should never be repeated,” he stated.
He highlighted the need for economic stability to underpin growth, warning against unsustainable fiscal and monetary stimulus, which has historically led to instability and “stop-go cycles” in Sri Lanka’s economic history.
Calls for Fiscal Discipline
The Treasury Secretary underlined the necessity of adhering to core economic principles like fiscal discipline and sound monetary management, regardless of political changes.
“The stabilization of public finances is vital to create fiscal space for development and to fulfill commitments to domestic and international stakeholders,” he said.
He expressed optimism about the depoliticization of macroeconomic policy, supported by legal reforms such as the Central Bank of Sri Lanka Act and the Public Debt Management Act.
Acknowledgments and Gratitude
Siriwardena credited the success to the tireless efforts of the Ministry of Finance, Central Bank, and political leadership since April 2022. He also acknowledged the contributions of advisors, creditors, and international financial institutions, particularly the IMF, in achieving this outcome.
Challenges Ahead
Despite the completion of debt restructuring and improved macroeconomic indicators, Siriwardena acknowledged the lingering pain experienced by citizens due to the crisis and the corrective measures.
“Sri Lanka’s economic crisis was a man-made crisis, which could have been prevented if early warning signs had been heeded and policy direction adjusted in time,” he noted, urging all stakeholders to internalize the lessons learned.
Fitch Ratings Upgrade
Fitch Ratings upgraded Sri Lanka’s Local-Currency IDR to ‘CCC+’, aligning it with the Long-Term Foreign-Currency IDR. The upgrade reflects reduced risks of local-currency debt default following the completion of domestic debt optimization in September 2023.
Sri Lanka now embarks on a new phase of its economic journey, with a focus on fostering sustainable growth, creating jobs, and rebuilding lives while maintaining fiscal and monetary stability.
