Sri Lanka’s Rating Lowered By S&P to B- as Debt Risks Climb

(Bloomberg) -- S&P Global Ratings lowered Sri Lanka’s credit rating by one level to B-, citing the government’s worsening fiscal position.

The rating was lowered from B, with a stable outlook, S&P said in a statement on Wednesday. That’s six levels below investment grade.

S&P said the Covid-19 pandemic could push the island nation’s economy into a recession in 2020, against earlier expectations of a rebound, and weaken its already-fragile fiscal position.

“Uncertainty over the pandemic and the associated economic fallout have increased Sri Lanka’s external financing risks,” it said.

The country’s dollar bonds due in 2030 traded up 4.9 cents on the dollar on Wednesday, having risen from the morning.

S&P follows a similar downgrade by Fitch Ratings last month, citing the nation’s already-rising public and external debt sustainability challenges.

Sri Lanka’s fiscal deficit would widen to 8% of gross domestic product in 2020 from 6.8% in 2019, S&P said, as dampened economic activity because of Covid-19 tempers tax collections. It estimates government revenues will decline to below 10% of GDP in 2020.

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