Fitch Ratings, one of the world's largest credit rating agencies, has upgraded the rating given to the Maldives, taking into account the relief brought to the country's debt situation after repaying a sukuk taken during the administration of former President Ibrahim Mohamed Solih.
In June last year, taking into account the debt situation of the Maldives, Fitch maintained the country's credit rating at 'CC'.
However, in the report released today, Fitch upgraded the Maldives' Long-Term Foreign-Currency Issuer Default Rating from 'CC' to 'CCC-'.
Fitch made this decision stating that following the successful repayment by the Maldives of a USD 500 million sovereign sukuk due last April, the risk of default has decreased.
The agency highlighted that because the government has fully paid off the sukuk, which was one of the largest external debts facing the Maldives, the potential economic risks have been significantly reduced.
In connection with this, the Ministry of Finance stated that this rating is evidence of the growing confidence in the important efforts being made by the government to stabilize the state's financial situation and service debt, even amidst global economic instability.
The report noted that although the credit rating of the Maldives was upgraded by one notch, fiscal risks remain high as revenues from tourism, the primary pathway for foreign currency into the Maldives, have taken a hit in connection with the ongoing war in the Middle East.
In this regard, it is estimated that the Maldives' gross reserves do not even have the funds required to cover a single month's worth of imports.
The report also estimated that the current account deficit will increase during this year to 17.5 percent of GDP, up from the 8.4 percent it stood at last year.
Fitch estimates that due to the increase of Maldivian Rufiyaa in the market, the dollar shortage will worsen further, presenting additional challenges to the government in maintaining the dollar rate.
Furthermore, Fitch estimated that the fiscal deficit of the Maldives as a percentage of GDP will increase to 14.6 percent during this year, up from the 2.9 percent it stood at last year.
This is an amount more than twice the 7.1 percent targeted by the government to contain the fiscal deficit within this year.
