Macroeconomic rebound and bond market appeal position the nation as a top emerging market bet for investors
Sri Lanka is poised to exceed the International Monetary Fund’s (IMF) debt reduction expectations two years earlier than planned, bolstering confidence among investors in its restructured dollar bonds.
According to analysts and financial experts, the island nation is becoming a standout example of economic recovery in the emerging markets space. Speaking to Bloomberg Television on July 2nd, Monica Hsiao, Founder and Chief Investment Officer at Hong Kong-based Triada Capital, highlighted Sri Lanka’s trajectory as a sign of regional macroeconomic improvement.
“Looks like they are going to beat the expectation of the IMF by two years ahead,” Hsiao said.
She noted that with bond yields in developed markets tightening, investors are increasingly turning to emerging markets in search of better returns. “On an all-in yield basis, it’s still relatively attractive. We’re able to find high-yield bonds offering 8–10% returns, which is still quite strong,” she added.
Sri Lanka’s 2030 step-up macro-linked restructured bond saw yields rise by 30 basis points in June, reflecting growing investor interest.
The Finance Ministry, in its latest Fiscal Strategy Statement, reported that the IMF now projects Sri Lanka’s public debt to fall from approximately 119.2% of GDP in 2022 to around 94.5% by 2030 — beating the original 2032 target of 95% of GDP.
“Adherence to the primary balance target and the expenditure ceiling will support achieving this goal, provided no major external shocks occur,” the statement said.
Additionally, the ministry is confident of meeting another crucial IMF benchmark: reducing the gross financing need (GFN) to below 13% of GDP on average between 2027 and 2032. The projected average is now expected to come in at around 12.7%.
Sri Lanka’s improved debt outlook and attractive yields are positioning it as a compelling choice for yield-hungry investors navigating a tighter global credit environment.