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Maldives’ Credit Rating Downgraded by Moody’s as Concerns over Long-Term Debt Rise

Adam Ahid by Adam Ahid
August 18, 2021
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Moody’s, a bond credit rating firm, has cut Maldives’ credit rating as concerns grow about the possibility of debt extension to manage state expenditure.

Moody’s has dropped Maldives’ credit rating for the second time in less than two years, with the company lowering the credit rating to B3 in May 2020, citing worries regarding debt payments.

At the time, the company saw that the Maldives needed extra loans to alleviate economic downturn and manage state expenses.

Maldives’ new credit rating has been downgraded to Caa1, and the same rating has been assigned to Maldives Sukuk Issuance Limited, a government-created entity that sells sukuk.

According to Moody’s, the country’s financial status has deteriorated more than expected as a result of debt commitments. With the current debt situation, the company predicted a greater budget deficit and a rise in interest rates on commercial loans.

Furthermore, even if tourism revenue rises, Moody’s warns that the government’s financial policy of pushing investment through loans to boost the economy will prolong the current debt situation.

However, Moody’s upgraded the Maldives’ outlook to ‘stable,’ indicating that, despite financial difficulties, an increase in tourism revenue and economic progress will boost the economy and lower the unemployment rate.

The country’s debt has risen to MVR 68.3 billion, or 103 percent of GDP, according to the finance ministry.

Tags: Moody's

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