Sri Lanka sovereign rating outlook raised by S&P’s

July 19, 2011 (LBO) – Standard & Poor’s Ratings Services has raised its outlook on Sri Lanka’s long-term foreign currency sovereign credit rating to positive from stable. “The outlook on the long-term local currency rating is stable. The transfer and convertibility (T&C) assessment is unchanged at ‘B+’,” a statement said.

“We revised our outlook on the foreign currency rating to reflect the improving external liquidity, progress in addressing structural fiscal weaknesses, the government’s effort to keep inflation near that of trading partners,” said Standard & Poor’s credit analyst Takahira Ogawa.

“The ratings are constrained by the sovereign’s fundamental fiscal weaknesses, high public debt and interest burden, and its political institutions that in some cases lack transparency,” the rating agency said.

“On the other hand, four months reserves coverage of current account payments, a return to single-digit inflation, and improved growth prospects are supporting factors for the ratings.”

Standard & Poor’s said it expects investment in the island to edge upward to 28 percent of GDP, boosting per capita growth to about 6.5 percent a year.

“If the