S&P Global Ratings on Friday raised its long- and short-term foreign currency sovereign credit ratings on Sri Lanka to ‘CCC+/C’ from ‘SD/SD’ (selective default).
“We also affirmed our ‘CCC+/C’ long- and short-term local currency ratings. The outlook on both the long-term foreign and local currency ratings is stable. The transfer and convertibility assessment remains ‘CCC+’,” the leading American credit rating agency said.
S&P Global Ratings said the stable outlook reflects “a balance between our expectation of Sri Lanka’s continued economic recovery, supported by fiscal reform and external improvements, and the country’s high debt and heavy interest burden over the next one to two years.”
However, the rating agency said it could lower the ratings on Sri Lanka “if we see indications of renewed funding and liquidity stresses.”
Developments that could precede such signs include a rapid rise in inflation, a further rise in the government’s interest burden, or significantly weaker fiscal performance, leading to funding pressures, the statement said.
“We could raise the ratings if economic growth continues to be robust and we believe that Sri Lanka’s fiscal and external improvements are more entrenched. This would improve the government’s ability to manage its large debt.”