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Maldives debt per capita will spike by 70 percent in next 10 years: Moody's

Nafaahath Ibrahim
05 September 2018, MVT 14:36
View from the new Dharumavantha Hospital. PHOTO: HUSSAIN WAHEED / MIHAARU
Nafaahath Ibrahim
05 September 2018, MVT 14:36

One of the world's leading credit rating agencies, Moody's Investment Service (Moody's), has predicted that due to increasing state loans, the Maldives' debt per capita would increase up to 70 percent of GDP within the next 10 years.

Moody's had first rated Maldives in September 2016, giving the archipelago a B2 rating which was intended to be maintained. However, in July 2018, the outlook on Maldives was changed from positive to negative.

The report released by Moody's on Tuesday predicts that while the debt of the country keeps increasing, the rating might go beyond a B-minus.

According to the report, the "liquidity and external vulnerability risks that the country faces" are due to the sudden increase in the government's debts.

The agency stated that the current credit profile of the government of Maldives (B2 negative) reflects the sovereign's healthy growth and competitive tourism sector.

However, they noted that a large portion of the current budget is deficits due to the significant increase in infrastructure spending.

The credit analysis titled "Government of Maldives" investigated the state in four categories: economic growth which was assessed to be "low (+)", institutional strength "low (-)", fiscal strength "low(+)" and susceptibility to event risk "moderate (+)".

This new report is not related to the ratings and it is only aimed to give up-to-date information to the investors, according to Moodys.

The July 2018 report predicted that since the sovereign bonds are due in 2022, the government still needed a way to fund the current projects. They also predicted that by 2019, the Gross Borrowing requirement will increase up to 8.3 percent of GDP from last years 7.1 percent.

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