Sri Lanka's credit rating has been boosted by S&P to 'CCC+/C' due to advances in debt restructuring efforts.
S&P Global Upgrades Sri Lanka's Foreign Currency Rating
In a significant development, S&P Global has upgraded Sri Lanka's foreign currency ratings from 'selective default' to 'CCC+/C' on Friday. This upgrade comes after the country's impressive economic recovery and rapid fiscal consolidation.
The decision was made in light of Sri Lanka's progress in restructuring its remaining commercial debt and its strong economic growth. According to official data, the country's economy grew 4.9% year-on-year in the second quarter of 2025, indicating a rebound from its worst financial crisis in decades.
Sri Lanka's economic situation has been under scrutiny due to the country missing sovereign bond interest payments, which led to a downgrade to 'selective default' by the agency in April 2022. However, the improvements in the country's economic conditions have been noted by S&P Global.
The agency highlighted the accumulation of foreign exchange reserves as one of the improvements in Sri Lanka's external position. They also mentioned efforts to mitigate fiscal risks stemming from Sri Lanka's state-owned enterprises as a positive development.
The outlook on Sri Lanka's foreign currency rating is now 'stable.' This upgrade is a reflection of Sri Lanka's progress and the strong momentum under its International Monetary Fund (IMF) program.
However, the agency's warning about global trade uncertainty pertains specifically to Sri Lanka's external sector. Global trade uncertainty could pose risks to the country's external sector.
Another positive development for Sri Lanka's economy is the reduction in tariffs on its exports to the United States. This reduction is expected to ease business uncertainty and boost the country's economy.
The IMF supports Sri Lanka in its economic restructuring and reform process. The upgrade in foreign currency ratings is a testament to the progress made so far and the potential for further economic growth. Sri Lanka expects its economy to grow by 6% in 2026.
While the upgrade is a significant step forward, it's important to note that the agency's current rating for Sri Lanka as an issuer of foreign currency debt is not specified. The country still faces challenges, but the upgraded rating is a positive sign that Sri Lanka is on the right track.
