One of the largest credit rating agencies in the world, Fitch Ratings, has once again assigned a “B minus” rating to the Maldives.
The agency gave a “B plus” rating to Maldives before the Covid-19 pandemic in 2020. Following the pandemic, the agency changed Maldives’ rank to “CCC” (Triple-C) in 2020, and later changed it to a “B minus” in 2021.
Fitch’s rating for the Maldives remained stable because of significant developments in the Maldives’ productivity and expansion of the tourism industry.
The agency also estimates a 7.2% economic growth in 2023, and a 6.6% increment for the following two years.
Despite positive rating, Fitch said the mounting state debt coupled with depletion of foreign currency reserve was posing challenges to the Maldives. The agency noted economic vulnerability of Maldives for its primary reliance of tourism sector activities as the main economic driver, which is impacted easily from external economic shocks.
Fitch further said that the Maldives faced additional challenges in its efforts to increase the foreign currency reserves, largely owing to the over-utilization of US dollars for imports and exports.
The US-based credit rating agency said that the Maldives reserve depleted to 16%, while the current national gross reserve is at USD 690 million out of which only USD 150 million were usable.
According to Fitch, Maldives will face new challenges in secure prospective foreign loans largely due to the current outstanding loans amounting to MVR 3.6 billion, with another MVR 4.6 billion in state-guaranteed loans; all of which require repayment.
Maldives government is required to pay MVR 5.6 billion in loan repayments in 2025, with the highest-ever repayment slated for 2026, with MVR 13.6 billion alone accounting for external loans.
Fitch also said that the Sovereign Development Fund (SDF) established for debt repayment held a total of MVR 7.3 billion right now, out of which 30 million were in US dollars.
The agency forecasts a marginal 0.3% drop in budget deficit in 2023 compared to last year, from 11.6% to 11.3%.