Moody’s decided to maintain the rating at Caa2, reflecting improvements in access to bilateral financing, new foreign currency regulation by the Maldives Monetary Authority (MMA), and revenue reforms being implemented by the government.
Global credit rating agency Moody’s has maintained the Maldives’ credit rating at Caa2, acknowledging the government’s ongoing financial and economic reforms aimed at stabilizing the country’s economy.
In September last year, Moody’s downgraded the Maldives’ rating from Caa1 to Caa2, citing heightened default risks due to persistently low foreign exchange reserves and limited prospects for a quick recovery.
However, after the review rating period, Moody’s decided to maintain the rating at Caa2, reflecting improvements in access to bilateral financing, new foreign currency regulation by the Maldives Monetary Authority (MMA), and revenue reforms being implemented by the government.
Moody's stated that the materialization of a substantial currency swap arrangement with India underscores the Maldives' continued access to bilateral financing. Additionally, the introduction of new foreign currency regulations and tax reforms enhances the prospects for accumulating foreign exchange (FX) reserves. These measures, coupled with additional reserves in the Sovereign Development Fund (SDF), provide a buffer to support external debt repayments.
Last September, the Maldives successfully secured external financing through a significant currency swap agreement with India, valued at USD 400 million and INR 30 billion.
However, external liquidity pressures remain elevated due to substantial debt obligations in the next 12 to 18 months. According to Moody's, the government’s external debt service is projected at USD 600 to 700 million in 2025 and approximately USD 1 billion in 2026, including the USD 500 million sukuk maturing in April 2026. Challenges in securing foreign currency persist despite recent efforts, Moody's said.
Moody’s noted that future changes to the credit rating, whether an upgrade or downgrade, will depend on the government’s ability to secure foreign currency financing and implement the budget’s reform measures effectively.
According to the Finance Ministry, total debt is projected to reach MVR 139 billion by the end of this year and is expected to increase further to MVR 150 billion in 2025, equivalent to 124 percent of the country's GDP.
Finance Ministry has outlined seven strategies to boost tax and fee revenue, with an estimated additional revenue of MVR 4.5 billion. Efforts to reduce wasteful public spending are also underway.
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