Maldives maintains fitch rating at B-

One of the largest credit rating agencies in the world, Fitch Ratings, has once again assigned a B- rating to the Maldives.

The agency gave a B+ rating to Maldives prior to the Covid-19 pandemic in 2020. Following the pandemic, the agency changed Maldives' rank to "CCC" (Triple-C) in 2020, which was changed to B- in 2021.

Fitch's rating for the Maldives has remained stable due to significant developments in Maldives' productivity and the expansion of its tourism industry.

The agency estimates a 7.2 percent economic growth rate for Maldives in 2023 and a 6.6 percent increment in the next two years.

Despite maintaining the positive rating, Fitch notes mounting state debt coupled with depletion of foreign currency reserve. The agency further identified the economic vulnerability of Maldives for its primary reliance of tourism sector activities as the main economic driver, which is impacted from external economic shocks.

Fitch, which has been the rating of the Maldives since 2017, said that the country faced additional challenges in its efforts to boost foreign currency reserves, mainly due to the utilization of US dollars for import and export activities.

Maldives Monetary Authority (MMA) acquired an additional USD 100 million loan from Reserve Bank of India in 2023 to adjust the national reserve.

Fitch said Maldives reserve had depleted to 16 percent, and the current gross national reserve stood at USD 690 million out of which only USD 150 million were usable.

The agency further said Maldives will observe new challenges in securing prospective foreign loans due to outstanding loans at MVR 3.6 billion and state-guaranteed loans at MVR 4.6 billion; all of which require repayment.

The government is required to pay MVR 5.6 billion in loan repayments in 2025. The highest repayment by the government is due in 2026, with MVR 13.6 billion alone accounting for foreign loans.

Fitch also noted that the Sovereign Development Fund (SDF) established for debt repayment held a total of MVR 7.3 billion, out of which 30 million were in US dollars.

The agency forecasts a marginal 0.3 percent decline in the budget deficit in 2023 compared to the previous year, resulting in a percentage drop from 11.6 percent to 11.3 percent.

State expenditures inflated in 2023 mainly due to the increase in developmental projects ahead of the presidential election and the consistent expenditure on subsidies.