Fitch Downgrades Maldives’ Credit Rating Amid Rising Debt Concerns

Fitch Ratings has downgraded the Maldives’ Long-Term Foreign-Currency Issuer Default Rating (IDR) from ‘B-‘ to ‘CCC+’, highlighting significant challenges in the nation’s ability to repay its debts.

The credit rating agency pointed to the rising external debt and declining foreign reserves as primary factors for the downgrade. According to Fitch, the Maldives’ foreign reserves dropped from USD 748 million in May 2022 to USD 492 million by May 2023. This decline, coupled with weakening external financing and liquidity metrics, has increased the risk associated with the country’s debt repayment capabilities.

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Fitch detailed that the Maldives faces substantial sovereign external debt-servicing obligations of USD 233 million and publicly guaranteed external debt-servicing obligations of USD 176 million, both due in 2024. 

Furthermore, Fitch forecasts that external debt servicing will rise to USD 557 million in 2025 and exceed USD 1 billion in 2026, including the repayment of a USD 500 million Sukuk. This projection suggests intensified pressure on the government’s external liquidity in the coming years.

Despite these challenges, Fitch anticipates the Maldives government will seek bilateral and multilateral financing support. The agency also expects the nation’s general state debt to increase to 117.6% of GDP by 2026, up from an estimated 109.4% in 2023. This figure is more than double the projected median for other nations in the ‘B’ category.

Fitch Ratings, one of the world’s largest credit rating agencies, has been evaluating the Maldives’ creditworthiness since 2016. Credit ratings assess the credit risk of a prospective debtor, predicting their ability to repay debt and the likelihood of default.