S&P raises outlook on Sri Lanka to stable

Ratings agency Standard & Poor’s raised its outlook on Sri Lanka to stable from negative yesterday, citing a recent International Monetary Fund standby loan.

The agency affirmed its “B” long-term foreign currency rating for the country.

“The IMF standby loan agreement may help condition policy formulation and aid in maintaining adequate external liquidity,” S&P said in a statement.

Sri Lanka last month agreed on a $2.6 billion loan with the IMF to help it build up depleted foreign exchange reserves and avert a balance-of-payments crisis. The sovereign is planning a $500 million Eurobond, following a similar debt issue launched in 2007.

“The ratings could be raised if government policies lead to a sustainable boost in tax revenues and reduced fiscal imbalances, such that debt ratios become more aligned with the median for this rating category,” S&P said.

Conversely, the ratings would come under downward pressure if the public debt trajectory tilts upward. The ratings would also come under downward pressure if external liquidity pressures are renewed.

Reuters