MMA responds to Moody's Ratings, assures debt repayment

Following Moody's Ratings' recent downgrade of Maldives' credit rating from a CAA1 to a CAA2 on review status pending further downgrades, the country's central bank Maldives Monetary Authority (MMA) has reassured Maldives would be able to repay its outstanding debts.

In its statement, MMA said that they project Maldives' GDP growth to reach 4.9% in 2024, and expand to 6.5% in 2025, supported by the tourism sector's performance and opening of the new terminal at Velana International Airport (VIA).

"Accordingly, by the end of August 2024 total tourist arrivals to the country have exceeded to 1.3 million, observing a 10% increase relative to the corresponding period of 2023. Further, the average duration of tourist stay has risen by 7% in July 2024 when compared with July 2023," the statement said.

Highlighting that both gross international reserves and usable reserves improved by the end of August 2024, relative to the previous month, MMA projects that the usable reserve which stands at USD 61 million, combined with the SDF balance would hike up the gross international reserves to surpass the USD 606 million projected in the 2024 state budget.

"With the aim of minimising the challenges to maintaining exchange rate stability, work is currently underway to reduce the MVR 6.7 billion surplus liquidity in the banking system by utilising monetary instruments. Accordingly, the MMA will commence Open Market Operations this year to mop-up the surplus liquidity," MMA also said, in response to Moody's statement which blamed Maldives' fragile external liquidity position, which they forecast would likely worsen further without near term financing.

MMA also revealed plans to revise monetary regulations to overcome the challenges to the foreign exchange market, which are to be announced within this month. This would boost the amount of foreign currency entering the domestic banking system, the bank expects.

"The MMA reaffirms the capability of the Government to service the upcoming external bond repayment in October 2024 and extends complete assurance that the obligation will be met in full by the due date. There remains no doubt that the MMA and the Government of the Maldives, together with all related government institutions, will be able to meet all future external debt obligations," MMA said as a closing remark.

Along with Moody's Ratings, Maldives has also received a downgraded rating from Fitch, which now stands at a CC, as opposed to the earlier CCC.

At the time Maldives' government assured that recommended action proposed by the rating agencies will be implemented. As of now Maldives is seen to be working towards cost cutting measures within state-owned organisations.