Despite the early-2021 rally reducing the previously glaring undervaluation of Sri Lankan bonds, they remain below fair value based on our detailed assessment of default and non-default scenarios. A non-default scenario remains feasible. Procrastination has taken hold, and it may require an intensification of funding pressures to push Sri Lanka away from China and towards the IMF. At that point, a restructuring is possible but not inevitable; clear fiscal measures could limit or avoid bondholder pain.
What you will learn from this report: