International ratings agency S&P Global has maintained Sri Lanka's sovereign credit rating at CCC+ with a stable outlook, citing resilient economic growth and fiscal improvements despite mounting external pressures from Middle East geopolitical tensions and rising energy costs.

S&P Global Ratings affirmed Sri Lanka's long- and short-term foreign and local currency sovereign credit ratings at 'CCC+/C' on July 27, 2026, with a stable outlook. The agency also upgraded the country's transfer and convertibility assessment to 'B-' from 'CCC+', signaling improved capacity to manage international transactions. The stable outlook reflects expectations that robust economic and revenue growth will help offset external uncertainties over the next 6 to 12 months.

The ratings agency credited Sri Lanka's economic resilience, noting that real GDP grew 4.8% in the final quarter of 2025 and 5.1% in the first quarter of 2026, exceeding earlier forecasts. Strong revenue growth has supported fiscal consolidation, with government revenue surging 34% in 2025 to reach 16.7% of GDP. However, S&P Global cautioned that economic growth is expected to decelerate to 3.8% in 2026 due to higher import costs and disruptions from the Middle East conflict affecting tourism, remittances, and energy supplies. The agency forecasts a rebound to 4.2% growth in 2027 as energy markets normalize.

The external position faces mounting pressure, with the current account expected to swing to a deficit of 1.7% of GDP in 2026. Rising fuel imports have driven currency depreciation of approximately 8% against the U.S. dollar in the first half of the year, while gross official reserves declined from US$6.88 billion in May to US$6.45 billion in June. Remittance growth slowed significantly from 30% year-on-year in May to 9% in June, and tourist arrivals fell nearly 10% in June, raising concerns about sustainability of these critical revenue sources.

Despite these challenges, S&P Global noted that government policy responses have contained economic damage. The Central Bank raised its policy rate by 100 basis points in May to anchor inflation, which had risen to 6.8% as of June 2026. The agency warned it could lower ratings if renewed funding and liquidity stresses emerge from significantly weaker external or fiscal performance, but could raise them if economic growth continues and strengthens Sri Lanka's external and fiscal metrics.