Sri Lanka could face sharply higher borrowing costs, or be shut out of international capital markets altogether, if S&P Global Ratings and Moody’s Ratings do not follow Fitch in upgrading the sovereign, Capital Alliance Securities has warned.
Fitch lifted Sri Lanka to ‘B-’ with a stable outlook on 22 September, moving the country out of the CCC range for the first time since the 2022 default. The other two major agencies have kept their ratings at levels the research house describes as substantial risk, Hiru News reported.
The 2027 issuance is the pressure point
If S&P and Moody’s do not upgrade before the current International Monetary Fund programme concludes in March 2027, the government may struggle to execute a planned US$1.5 billion international sovereign bond issuance in 2027 — or be forced to price the debt with a high risk premium, Capital Alliance said.
Missing those issuances would leave foreign reserves stranded at around US$10 billion, short of the US$11.8 billion the analysts say is needed ahead of a sharp step-up in external debt service payments that begins in 2028.
Why the agencies diverge
Fitch based its upgrade on a record primary budget surplus of 5.4% of GDP in 2025, economic growth holding near 4%, and reserves rebuilding to US$6.9 billion by August 2026.
S&P and Moody’s have held back over Sri Lanka’s interest burden — interest payments absorb 41% of government revenue — and apply a stricter calculation of usable foreign reserves.
Capital Alliance added that the success of Sri Lanka’s transition out of the IMF programme will remain highly sensitive to external shocks, singling out global crude oil prices, which need to stay low to limit foreign exchange outflows.
