Moody's Investors Service has announced the possibility of raising Sri Lanka's 'Ca' long-term foreign currency rating after the gove ment’s recent bond exchange offer, part of the ongoing debt restructuring process.

The bond swap, launched on Tuesday, is a crucial step in Sri Lanka's $12.55 billion debt restructuring program, aimed at stabilizing the nation’s economy. Moody's provisionally rated the newly issued U.S. dollar-denominated debt at 'Caa1,' three notches higher than the current rating, though still within the speculative ‘junk’ category.

The gove ment issued various bonds, including macro-linked, gove ance-linked, and step-up bonds. Despite conce s about the new gove ance-linked bonds, Moody’s clarified that they will be treated the same as other gove ment obligations.

Sri Lanka had defaulted on foreign debt in May 2022, exacerbating the ongoing economic crisis. Following this announcement, Sri Lankan USD bonds saw a rise, with the June 2025 issue increasing to 65.875 cents on the dollar.