Sri Lanka records fourth-biggest improvement in IIF investor assessment

• IIF says Sri Lanka among fastest-improving sovereigns for investor relations and debt transparency
• Report says transparency can lower borrowing costs by reducing investor uncertainty, but does not make up for weak fundamentals
• Progress expected to strengthen investor confidence and widen sovereign investor base

Sri Lanka has emerged as one of the fastest-improving emerging market sovereigns for investor relations and debt transparency, with the Institute of International Finance (IIF) ranking the country fourth among the largest improvers in its 2026 assessment, as the Government seeks to rebuild investor confidence following its debt restructuring. 

The IIF’s Investor Relations and Debt Transparency Report 2026: The Transparency Dividend found Sri Lanka’s overall Investor Relations Country Score rose to 43.67 out of 50 in 2026 from 37.33 in 2025, placing the country in the top quartile of 57 emerging markets and developing economies assessed against international best practices. The survey average increased only marginally to 37 from 36.1 a year earlier. 

The report identified Sri Lanka among a small group of “fast movers,” recording the fourth-largest improvement in investor relations scores with a gain of 6.3 points, behind Vietnam, Belize, and Mozambique. It also highlighted Sri Lanka as one of the strongest performers in improving debt transparency practices during the year. 

The Finance and Planning Ministry said Sri Lanka’s improvement was driven by stronger debt transparency and environmental, social and governance (ESG) data and policy dissemination, with the country becoming the fifth-highest improver in both categories.

According to the Ministry, Sri Lanka’s debt transparency ranking improved significantly from 19th among score improvers in 2025 to fifth in 2026, reflecting what it described as sound debt management practices adopted over the past year.

The Ministry attributed the progress to continued efforts by the Public Debt Management Office (PDMO), working with other Government institutions, to strengthen the country’s sovereign investor relations framework through enhanced investor engagement and debt transparency.

It said the improvements were expected to strengthen investor confidence, broaden Sri Lanka’s sovereign investor base, support market access, and enhance the country’s credibility in international capital markets. 

The IIF said the findings come as governments worldwide face intensifying competition for global capital amid a structural spending “super-cycle” driven by defence expenditure, clean energy investment, artificial intelligence (AI) infrastructure, and rising healthcare costs, while borrowing costs remain elevated and fiscal space remains constrained.

Against that backdrop, the report argues that transparency has become an increasingly important determinant of borrowing costs for emerging markets.

The IIF said timely, credible, and predictable disclosure of fiscal, debt, and policy information enables investors to distinguish known risks from unknown risks, reducing the uncertainty premium embedded in sovereign borrowing costs. Over time, stronger disclosure and sustained investor engagement can broaden the investor base, reinforce market access, and contribute to more stable sovereign credit ratings.

While transparency cannot compensate for weak economic fundamentals, the report said it allows policymakers to address underlying fiscal challenges more effectively with investor support and is one of the few factors influencing borrowing costs that remains entirely within the control of sovereign authorities.