S&P revises Sri Lanka’s sovereign rating to ‘stable’

The Standard and Poor’s Ratings Services (S&P) has revised Sri Lanka’s sovereign rating outlook to ‘stable’ from ‘negative’ to reflect the country’s improved external liquidity position and better prospects for policy formulation under the Stand-by Arrangement (SBA), approved by IMF on July 24, 2009.

The S&P, on December 15, 2008, downgraded Sri Lanka’s sovereign rating to ‘B’ from ‘B+’ mainly citing the deterioration of the external liquidity position while raising the outlook to ‘stable’.

However, the outlook was changed subsequently to ‘negative’ on May 21, 2009, a decision many considered arbitrary, as that move was taken by S&P a few days after the end of the 26-year-old internal conflict.

The positive response by international investors after the end of the conflict confirmed the fact that investors ignored the arbitrary move by S&P to downgrade Sri Lanka’s outlook.