S&P Global Ratings has affirmed Sri Lanka’s long and short term foreign and local currency sovereign credit ratings at ‘CCC+/C’ with a stable outlook, expressing confidence that the country’s economic recovery and fiscal consolidation will continue despite growing global uncertainties.

The agency said the stable outlook reflects expectations that the conditions supporting economic growth and fiscal repair will remain intact over the next six to twelve months, even as growth moderates and the current account moves back into deficit. S&P also upgraded Sri Lanka’s transfer and convertibility assessment to ‘B-’ from ‘CCC+’, signalling that while the nation remains vulnerable, it is no longer facing an immediate funding or payment crisis.

According to S&P Global Ratings, Sri Lanka’s economy is expected to expand by 3.8 per cent in 2026, before strengthening to 4.2 per cent in 2027 as energy supply challenges ease. The agency noted that continued official financing, together with the Government’s reform agenda under the International Monetary Fund Extended Fund Facility, should support stronger fiscal and external performance.

S&P highlighted that revenue collection has improved following tax reforms and the reopening of vehicle imports, while projecting Government debt to gradually decline over the coming years. However, it cautioned that Sri Lanka remains exposed to external risks, including prolonged instability in the Middle East, higher energy prices, weaker tourism earnings and slower remittance inflows.

The ratings agency added that sustained economic growth, continued structural reforms and stronger fiscal management could support future rating upgrades, while renewed funding or liquidity pressures could weigh negatively on the sovereign credit profile.