S&P affirms Sri Lanka’s ‘CCC+/C’ sovereign ratings with stable outlook
Reported by NewsWire
7 hours ago
S&P Global Ratings has affirmed Sri Lanka's long-term and short-term sovereign credit ratings at 'CCC+/C' with a stable outlook, highlighting the country's resilient economy and fiscal consolidation. However, the agency warned of potential external pressures from higher import costs and the Middle East conflict, which could slow foreign reserve rebuilding.
S&P Global Ratings has maintained Sri Lanka's foreign and local currency sovereign credit ratings at 'CCC+/C' for both long-term and short-term maturities, accompanied by a stable outlook. The agency noted the country's economic resilience amidst multiple external shocks, with strong revenue growth supporting fiscal consolidation and reducing the government's debt servicing load.
Despite these positive signs, S&P cautioned that Sri Lanka's external position may weaken this year due to rising import costs and the impact of the Middle East conflict on tourism and worker remittances. This could slow the accumulation of foreign exchange reserves.
The agency also raised Sri Lanka's Transfer and Convertibility Assessment to 'B-' from 'CCC+', reflecting lower risks in transferring funds abroad and converting local currency into foreign exchange.
S&P expects Sri Lanka's economic growth and fiscal reforms to continue over the next six to 12 months, though it does not foresee a significant improvement in the credit profile during that period due to ongoing risks from external demand, inflation, and financing conditions.
The ratings agency noted that public debt remains high, with government interest payments estimated at around 45% of revenue. It forecasts economic growth to moderate to 3.8% in 2026 before recovering to 4.2% in 2027.
S&P indicated that stronger-than-expected economic growth and further improvements in fiscal and external indicators could lead to a ratings upgrade. Conversely, weaker fiscal or external performance, or renewed funding and liquidity pressures, could result in a downgrade.