If the IMF program was successfully concluded as expected by S&P, Sri Lanka's government finances would see a "modest improvement," credit analyst Agost Benard said in a statement.
S&P also confirmed 'B+' long-term local currency sovereign credit rating, and the 'B' short-term ratings on the sovereign.
The agency also confirmed the issue ratings on Sri Lanka's senior unsecured debt and the 'B+' transfer and convertibility assessment.
The recovery rating of '4' on Sri Lanka's senior unsecured foreign currency debt has also been confirmed, which the agency said reflected its expectation of an average recovery of 30 to 50 percent in the event of a distressed debt exchange or payment default.
"The swift recovery in Sri Lanka's foreign currency reserves is propelled by both fundamental and market factors," the agency said.
"It is underpinned by investor recognition that the civil war has ended decisively, and that the IMF program is now in place, with a reasonable degree of likelihood that it will be completed."
Aside from cross-border investment in the government bond market, reserves are also improving on account of rising remittances and rebound in tourism receipts, combined with a significantly narrowed trade deficit.
Foreign direct investment flows are expected to add to these inflows with some lag.
But the ratings on Sri Lanka remain constrained by a high public debt burden and underlying perennially large fiscal deficits, S&P said.
Fiscal shortfalls averaged 7.8 percent of gross domestic product over the past decade, and net general government debt of 80.3 percent of GDP (2008) imposed a high debt service burden with an estimated 33 percent of revenues needed for interest payments.
"These metrics are well above the median for similarly rated sovereigns and remain a source of significant vulnerability to macroeconomic and external stability," S & P said.
S & P said there was an "increased likelihood of progress in addressing prevailing structural fiscal weaknesses."
A tax commission which is part of the IMF program will involved some "modest" broadening of the tax base.
The ratings on Sri Lanka could be raised on evidence of continued implementation of the IMF program, including progress in expanding revenue-generation capacity following the tax commission's recommendations, S&P said.
"The rating, however, could come under downward pressure in the event of substantial deviation from the IMF program or early termination of it, or if expectations on recovery in growth prospects and revenue improvements disappoint," Benard said.