Last week ended with the positive news that Fitch Ratings has upgraded Sri Lanka’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to the ‘CCC+’ status from ‘RD’ (Restricted Default) and has also upgraded the Local-Currency IDR to the ‘CCC+’ status from ‘CCC-’ in order to align with the Long-Term Foreign-Currency IDR. 

It has pointed out Sri Lanka’s completion of the international sovereign bond restructuring and an improved outlook for macroeconomic indicators. This indicates that the risk of another default on local-currency debt has been reduced. Now, Sri Lanka is officially in a better position as a borrower, which can lead to significant positive impacts on the country’s economy.

It has been a painful and arduous journey. During the past few years, the authorities had to make difficult decisions, and in most cases, it was the ordinary citizens that felt the brunt of these decisions. Many lost their jobs, many people starved, children dropped out of schools, some took their lives, and professionals left the country. This is therefore a collective victory achieved by millions of people who fought the worst economic battle since the country’s Independence.

While acknowledging the immense and unmatchable contribution extended by the public, we cannot forget about the political and public authorities that paved the way for this achievement through unpopular yet scientific decisions. When those decisions were taken in the context of the economic crisis, it was an extremely difficult job. On the one hand, the people were struggling and seeking relief, although what the authorities could do was significantly limited. On the other hand, the Government had to remedy decades of economic mismanagement within a short period of time. Both these aspects were necessary, and both these aspects had to be carefully handled. Former President Ranil Wickremesinghe, Treasury and Finance Secretary Mahinda Siriwardena, and Central Bank of Sri Lanka Governor Dr. Nandalal Weerasinghe initiated these difficult yet essential measures during the former Government’s tenure, while present President Anura Kumara Dissanayake seems to be continuing those measures in a careful manner. Credit must be given where it is due, and those who did what needed to be done should be commended irrespective of their political opinions.

Sri Lanka is one of the few countries in the world that managed to gain ratings upgrades from a default status within such a short period of time.

However, this achievement is not the end of the economic downturn that the country is dealing with. This only means that the country can borrow when necessary as a more stable borrower, which is an opportunity that the country should utilize extremely carefully and wisely. It is incumbent on the current Government led by the National People’s Power and President Dissanayake to use this painful achievement in the country’s best interests and not waste it.

The Government should continue to implement decisions derived from sound policies, both initiated by the previous administration and new proposals. In this process, while giving the people more relief is crucial, the biggest priority should be correcting national-level flaws including through legal, policy, and practical changes. When it comes to domestic measures, one key priority is streamlining the operations of the public sector in order to reduce waste and losses and to eradicate corruption. At the same time, it is equally important to strengthen Sri Lanka’s relationship with regional and international partners in order to secure the external support that the country needs. For the latest ratings upgrade to translate into something that the country can benefit from, the Government should strengthen and expand its international affairs, especially concerning financial assistance. 

At the same time, the Government should not forget that despite this ratings upgrade, household and rural economies are still struggling with the impacts of the economic crisis and they still require solutions and support. Therefore, the right kind of change which Sri Lanka needs must be delivered. Perhaps at the cost of some populist promises which brought them to power. In all things forthwith Sri Lanka must make the right strategic calculations, and when the equation is set, the outcome must be in favour of national interest.  There is little time to dilly dally, or pussyfoot over unpalatable issues, with policy consensus formed from robust discussion this nation must gather steam and move forth in the right direction.