S&P upgrades SL Outlook to Stable from Negative

S&P has revised its Outlook on Sri Lanka to Stable from Negative whilst affirming the 'B+/B' ratings.

S&P said that the revised Outlook is based on the assessment that strengthening of Sri Lanka's institutions and governance practices is on more sustainable footing.

S&P said the Government has maintained its reform momentum, as shown by the passage of the Inland Revenue Act.

It expects the Government to implement additional measures to smooth the approaching debt redemption spike in 2019.

"We are therefore revising our Outlook on Sri Lanka to Stable from Negative and affirming our 'B+/B' sovereign credit ratings on Sri Lanka," S&P said.

The Stable Outlook reflects S&P expectations that the Government will maintain the reform momentum over the next 12 months and smooth the upcoming surge in debt redemptions, particularly in 2019.

"The Stable Outlook reflects our expectation that the Government will maintain the reform momentum over the next 12 months and smooth the upcoming surge in debt redemptions, particularly in 2019," S&P added.

Downward pressure on the rating could materialise if the political environment were to become more fractious, derailing the legislative program, especially its liability management reform.

A higher rating is unlikely in the next 12 months, but upward pressure could coalesce if Sri Lanka's external and fiscal indicators show dramatic improvement. Upside pressure could also materialise if it concludes that there has been a substantive improvement in Sri Lanka's institutional settings, including a continued strengthening of monetary policy credibility and independence at the Central Bank, S&P said.