S&P Global Ratings has affirmed Sri Lanka’s long- and short-term foreign and local currency sovereign credit ratings at ‘CCC+/C’, while maintaining a stable outlook on the country’s long-term ratings.

The ratings agency said the stable outlook reflects its expectation that conditions supporting Sri Lanka’s economic growth and fiscal consolidation will continue over the next six to 12 months. However, S&P cautioned that significant risks remain, including external demand pressures, inflation risks, and challenging financing conditions.

S&P also revised Sri Lanka’s transfer and convertibility assessment to ‘B-’ from ‘CCC+’, indicating an improvement in its assessment of the risks associated with currency conversion and cross-border payments.

The agency said the ‘CCC+’ rating reflects Sri Lanka’s vulnerable credit position, with the country’s ability to meet financial obligations still dependent on favorable economic and financial conditions. However, S&P noted that the government does not face an immediate credit or payment crisis.

Sri Lanka’s high public debt burden remains a key challenge, with the government’s interest payments estimated at around 45% of revenue.

S&P also pointed to temporary pressures on the country’s external and fiscal balances following recent external shocks, including Cyclone Ditwah in late 2025 and the impact of the war in the Middle East.

Despite these challenges, S&P said official financing support, ongoing economic recovery and structural reform efforts are expected to help Sri Lanka manage its financing needs and continue improving fiscal and external conditions.

The ratings agency warned that a downgrade could occur if Sri Lanka faces renewed funding and liquidity pressures, including weaker-than-expected fiscal or external performance.