Globally renowned credit rating agency, Moody’s has acknowledged Maldives government’s efforts for fiscal reforms to maintain the island nation’s ‘Caa2’ credit rating issued in September last year.
The review was conducted through a rating committee held on 8 May on the appropriateness of the ratings in the context of recent developments being reassessed.
This decision comes after the rating agency adjusted the nation's credit rating from CAA1 to CAA2, in September last year. Despite the challenges of foreign debt repayments, Moody’s has opted not to downgrade the rating further, citing the implementation of significant economic reforms.
Moody’s noted that the pandemic led to a significant shortfall in economic output - given the economy's reliance on tourism - and a surge in government debt, although a tourism rebound has since supported a strong growth recovery, reflecting healthy economic growth potential and a competitive tourism sector.
Despite a gradual uptick in foreign exchange reserves observed since October 2024, driven by external financing support and the implementation of foreign exchange reforms, the impending maturity of sizeable external debt obligations remains a significant credit concern for Maldives, the agency said.
According to Moody’s, volatile market sentiment, stemming from uncertain US economic policy, will further challenge Maldives' ability to access international markets and secure financing from bilateral and private creditors to either refinance or repay these debts.
Moody’s decision to maintain Maldives’ credit rating came after President Dr Mohamed Muizzu revealed that the government is committing USD 162.09 million to debt servicing this year, with USD 100 million strategically allocated for settling past loans as part of broader fiscal reforms.
President Muizzu had also noted that the Sovereign Development Fund (SDF) balance had grown significantly. When his administration took office, he said, the fund stood at USD 2 million which had risen to USD 121 million by the start of May.