Bu the country had high debt, growing external borrowing and weak institutions.
Sri Lanka's Global Bond Issue Due 2019 Rated 'B+'
SINGAPORE (Standard & Poor's) Jan. 6, 2014--Standard & Poor's Ratings Services today assigned its 'B+' senior unsecured debt rating to the proposed benchmark size U.S.-dollar-denominated global bond issue by the Democratic Socialist Republic of Sri Lanka (B+/Stable/B). The bonds mature in January 2019.
The bonds will constitute direct, unconditional, unsubordinated and unsecured general obligations of the issuer, and payments will be backed by the full faith and credit of Sri Lanka.
The sovereign credit ratings on Sri Lanka take into account the country's relatively weak external liquidity, moderately high and increasing external debt, and a high government debt and interest burden. In addition, some of the country's political institutions lack extensive checks and balances.
If Sri Lanka sustains its recent improvements in external indicators, including a reduction in the current account deficit, these rating constraints could ease.
The rating constraints are balanced against robust growth prospects. Growth drivers include government measures to reconstruct the northern districts, improve the finances of public enterprises, and limit inflation to single digits.