S&P Global Ratings has affirmed Sri Lanka’s long-term and short-term foreign and local currency sovereign credit ratings at ‘CCC+/C’ with a stable outlook, citing the country’s resilient economic performance despite increasing external challenges.
In its latest assessment, the ratings agency said Sri Lanka’s economy has remained resilient in the face of multiple external shocks, while strong government revenue growth has continued to support fiscal consolidation and ease the debt servicing burden.
However, S&P cautioned that Sri Lanka’s external position could weaken this year due to higher import costs and the impact of the Middle East conflict on tourism earnings and workers’ remittances, which may slow the rebuilding of the country’s foreign exchange reserves.
The agency also upgraded Sri Lanka’s Transfer and Convertibility Assessment to ‘B-’ from ‘CCC+’, reflecting reduced risks associated with transferring funds overseas and converting local currency into foreign exchange.
S&P expects Sri Lanka to continue implementing economic reforms and fiscal consolidation measures over the next six to 12 months. However, it does not anticipate a significant improvement in the country’s overall credit profile during that period due to ongoing risks related to external demand, inflation and financing conditions.
The ratings agency noted that Sri Lanka’s public debt remains elevated, with government interest payments estimated at around 45% of total revenue. It also forecasts economic growth to moderate to 3.8% in 2026 before recovering to 4.2% in 2027.
According to S&P, stronger-than-expected economic growth and further improvements in fiscal and external indicators could lead to a future ratings upgrade. Conversely, weaker fiscal or external performance, or renewed funding and liquidity pressures, could result in a downgrade.
