All three global ratings agencies confirm Sri Lanka’s exit from default

Monday, 22 September 2025 05:51 - - {{hitsCtrl.values.hits}}

All three global ratings agencies have lifted Sri Lanka’s sovereign ratings out of default, confirming the country’s recovery phase and placing the ratings in the speculative grade.

S&P Global Ratings on Friday raised Sri Lanka’s long- and short-term foreign currency ratings to ‘CCC+/C’ from ‘SD/SD’. Fitch Ratings had upgraded the sovereign to ‘CCC+’ from ‘RD’ on 20 December 2024, while Moody’s raised its rating to Caa1 from Ca on 23 December 2024.

Despite the upgrades, the agencies flagged Sri Lanka’s heavy debt and weak public finances. Net Government debt is projected at 101% of GDP in 2025, easing only to 93% by 2028. Interest costs are expected to consume about 51% of revenue this year, far above the peer median of 16%. Revenue has improved to about 15% of GDP, from 8.3% in 2021-22, but remains narrow. Reserves recovered to $ 6.1 billion by August 2025, while GDP grew 4.9% in the second quarter after two years of contraction.

But the agencies said investor confidence will hinge on whether the Government sustains International Monetary Fund (IMF)-backed fiscal and structural reforms. Political and governance risks remain a key constraint on the outlook.