Standard & Poor’s raises Lanka’s ratings
Standard & Poor’s Ratings Services raised its long-term foreign
currency sovereign credit rating on Sri Lanka to ‘B+’ from ‘B’, and the
long-term local currency rating to ‘BB-’ from ‘B+’.
At the same time, Standard & Poor’s affirmed the ‘B’ short-term
rating on the sovereign. The outlook on the ratings is stable.
Standard & Poor’s raised all the issue ratings on Sri Lanka’s senior
unsecured debt accordingly.
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Governor
Ajith Nivard Cabral |
Standard & Poor’s affirmed its transfer and convertibility assessment
of ‘B+’, and its recovery rating of ‘4’ on Sri Lanka’s senior unsecured
foreign currency debt, which signals the expectation of an average
recovery of 30 percent - 50 percent in the event of a distressed debt
exchange or payment default.
“The rating upgrade takes into account the continued strengthening of
Sri Lanka’s balance-of-payments position, and reflects Standard & Poor’s
expectation that the Government’s planned revenue reforms will improve
public finances, such that fiscal deficits and public debt will decline
again in a sustainable manner,” Standard & Poor’s credit analyst Agost
Benard said.
These positive factors are balanced against ongoing risk posed by
excessive public and external leverage, and the risk of a rebound in
inflation.
The stable rating outlook reflects our expectation of swift progress
in addressing structural fiscal weaknesses mostly on the revenue side
and the strong growth prospects.
“We may raise the ratings on Sri Lanka on evidence of more
comprehensive fiscal or structural economic reforms resulting in
faster-than-expected reduction of vulnerabilities posed by the high debt
and interest burdens, and still-narrow economic profile,” Benard said.
Standard & Poor’s may lower the rating in the event of substantial
deviation from the IMF program, or if expectations on recovery in Sri
Lanka’s growth prospects and revenue improvements disappoint, he added.
Speaking to Daily News Business Central Bank Governor Ajith Nivard
Cabral said this rating upgrade has been a predictable reaction to the
constantly improving macro economic fundamentals of our country.
“We are pleased that S and P have done this upgrade although it would
not have come as a surprise to the many investors and stakeholders. We
are quite sure that Sri Lanka’s rating will continue to improve in time
to come,” the Governor said. CdeS
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