Credit ratings agency Moody's on Monday raised Sri Lanka's long-term foreign currency issuer rating to 'Caa1' from 'Ca' with a stable outlook, after the country's creditors approved a $12.55 billion debt overhaul last week.

Moody’s Ratings upgraded Sri Lanka’s credit rating, days after the nation concluded debt restructuring of its dollar bonds, which reduces the risk of default on future notes.

Moody's rating hike action comes after the review, which started last week. The rating upgrade to ‘Caa1’ marks a stable outlook for the island nation of Sri Lanka, reported Reuters.

Sri Lanka's consumer price inflation dropped to minus 1.7% year-on-year in November after easing to minus 0.7% in October, official data showed on Monday, as the country posted a strong rebound from its worst financial crisis in decades.

Sri Lanka gained extensive support from private creditors to restructure its international bonds, a key step for the country to exit an extended default.