Sri Lanka's credit rating has been elevated by S&P to 'CCC+/C' due to the country's advancements in debt restructuring.
Sri Lanka's economy is showing signs of recovery, with S&P Global upgrading the country's foreign currency ratings from 'selective default' to 'CCC+/C' on Friday. This marks a significant step forward for the island nation, which has been grappling with its worst financial crisis in decades. The upgrade comes after Sri Lanka successfully restructured its remaining commercial debt, a move that has been acknowledged by S&P Global as a positive development for the country's economy and its ability to access international financial markets. The economic growth, evident in the 4.9% year-on-year growth in the second quarter of 2025, underscores the rebound from the crisis. However, global trade uncertainty could pose risks to Sri Lanka's external sector, a factor that S&P Global has noted. The president of Sri Lanka during this economic upswing and credit rating upgrade is Anura Kumara Dissanayake. The president's administration has been spearheading the economic recovery and reforms under Sri Lanka's International Monetary Fund program. The progress made in restructuring the debt and the economic recovery and reforms under the IMF program have been the basis for S&P Global's decision to upgrade Sri Lanka's foreign currency ratings. Yet, the agency's current assessment does not indicate a return to investment grade status for Sri Lanka's foreign currency ratings. On a positive note, the outlook on Sri Lanka's foreign currency rating is now 'stable.' This stability could help Sri Lanka in its aim for a growth rate of 6% in 2026. In addition, reduced tariffs on Sri Lanka's exports to the United States are expected to ease business uncertainty, potentially contributing to the country's economic growth. However, it's important to note that Sri Lanka's local currency ratings remain at 'D/SD' with a 'negative outlook.' This means that while the foreign currency ratings have improved, the local currency ratings still reflect a high risk of default. In conclusion, the upgrade in Sri Lanka's foreign currency ratings is a step in the right direction for the country's economy. It signals a positive outlook for the future, but it also underscores the need for continued economic reforms and careful management of the country's financial situation.
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