Despite estimations over declining economy, Fitch Ratings maintain Maldives' rating

Fitch Ratings, leading provider of credit ratings, have maintained the rating of B minus, assigned to Maldives in 2021 this year as well.

Even though they have maintained the same rating this year, they predict the economic situation of the country will decline.

Fitch Ratings estimate that Maldives’ economy will decline due to the deteriorating global economic situation, and the impact of higher priced commodities on Maldives’ reserve. Even though they had predicted last year that Maldives will be able to maintain its economy without declining, they now predict that the economy will see a decline next year.

As Maldives' reserve is now at USD 540 million compared to USD 1 million last year, Fitch Ratings believe Maldives' reserve will continue to decline.

They said Maldives' reserve is declining due to the increased money needed to import fuel and food to the country, in addition to having to repay the currency swap made between Maldives' Monetary Authority (MMA) and Reserve Bank of India. MMA's efforts to maintain the value of the Maldivian Rufiyaa is also leading to a decline in state reserves, according to Fitch Ratings.

Maldives' debt is also expected to increase.

They also said while Maldives' state debt was at 96.2 percent of the state GDP last year, it is expected to increase to 101.8 percent this year. The state will have to spend USD 214 million to repay the debt next year, and USD 151 million debt taken with the state guarantee will also have to be repaid this year.

Another worrying factor, according to Fitch Ratings, is that the Sovereign Development Fund established in Maldives to repay state debt was at only MVR 32.8 million this year. As the price of big developmental projects increase, especially those undertaken with money borrowed from foreign sources, the budget deficit is expected to increase from 13.8 percent to 15.7 percent as well.

Even though Fitch Ratings have expressed concern over Maldives' economy, the rating given in 2021 was maintained this year due to the 9.5 percent increase in economy due to tourism. The state has said that tourism will prevent Maldives' economy from declining lower than 7.5 percent next year as well.