Previous govt's money printing led to rating downgrade, says Shareef

Chief Government Spokesperson Mohamed Hussain Shareef has said that international financial institutions are primarily concerned about the Maldives' debt levels and past monetary expansion rather than the country's sovereign credit rating.

Shareef made the remarks during a press conference on Saturday while responding to questions about the recent decision by Fitch Ratings to upgrade the Maldives' sovereign credit rating from 'CC' to 'CCC-'.

A journalist noted that despite the upgrade, the Maldives' rating remains below the level it held when the current administration took office and asked why the government was highlighting the development as a major achievement.

In response, Shareef said the government was not placing excessive emphasis on the Fitch rating alone and argued that the factors behind previous rating downgrades extended beyond the impact of the COVID-19 pandemic.

He acknowledged that the previous administration secured financial assistance to support the country's recovery from the pandemic. However, he said international financial institutions had expressed concern over the use of monetary financing and the accumulation of debt during that period.

"Fitch is not the only issue, nor is it the central concern. In our discussions with international financial institutions, their biggest concern was money printing," Shareef said.

He added that borrowing continued until the final stages of the previous administration, contributing to an increase in public debt.

"Those loans pushed us close to 130 per cent of GDP," he said.

Shareef said the current administration is working to reduce the debt-to-GDP ratio through fiscal reforms and expenditure management.

He described the latest Fitch upgrade as an indication that progress is being recognised by international observers.

According to Shareef, one of the administration's key achievements has been managing government expenditure within approved budget limits.

He also pointed to state revenue performance, noting that government revenue reached its highest recorded level last year.

"In reality, our greatest achievement is that, after five years, we are managing state operations within the budget," Shareef said.

Fitch upgraded the Maldives' rating on Wednesday, citing a reduction in short-term default risks following the successful repayment of the country's USD 500 million sovereign sukuk in April.

The government has described the rating action as evidence that its fiscal and debt-management measures are beginning to produce results.