Moody’s Investors Service has downgraded the government of Maldives’ long-term local and foreign currency issuer ratings from Caa1 to Caa2, placing the ratings under review for a potential further downgrade, according to a statement released Wednesday.
The credit rating agency has also lowered the long-term foreign currency-backed senior unsecured rating for Maldives Sukuk Issuance Limited from Caa1 to Caa2, with the rating similarly placed under review for possible further reduction.
The downgrade reflects Moody’s assessment of increased default risks for the Maldives. The agency pointed to the country’s low foreign exchange reserves—despite including assets from the sovereign development fund—and the bleak prospects for a significant recovery. The Maldives faces a narrowing window for building up foreign exchange resources amidst substantial external debt obligations due within the next 12 to 18 months.
While the Maldivian government is actively seeking external financing, the future of comprehensive financing remains uncertain. The country is grappling with large twin deficits, which are exacerbating pressures on its reserves. Additionally, delays in implementing essential fiscal reforms are contributing to the economic strain.
In conjunction with the rating downgrades, Moody’s has also adjusted the Maldives’ local and foreign currency ceilings, reducing them to B2 and Caa1 from B1 and B3, respectively.
