Maldives assures bond repayment amid Moody's rating cut

Maldives Monetary Authority (MMA), the central bank of the Maldives, on Wednesday said the government is capable to meet its external bond repayment obligations, in a bid to respond to a rating downgrade by Moody's Ratings.

Moody's on Wednesday downgraded Maldives' long-term local and foreign currency issuer ratings to Caa2 from Caa1 and placed the ratings under review for further downgrade, following a similar rating downgrade by Fitch Ratings in August.

Additionally, the long-term foreign currency backed senior unsecured rating for Maldives Sukuk Issuance Limited has also been downgraded to Caa2 from Caa1 and placed under review.

In response, MMA issued a statement addressing key economic developments and the credit rating action by Moody’s.

The MMA projects that the Gross Domestic Product (GDP) of the Maldives will grow by 4.9% in 2024, expanding further to 6.5% in 2025. This growth is expected to be driven by the strong performance of the tourism sector, supported by an increase in tourist arrivals following the opening of the new arrival terminal at Velana International Airport.

As of the end of August, total tourist arrivals had surpassed 1.3 million, marking a 10% increase compared to the same period in 2023. The average duration of tourist stays rose by 7% in July compared to July 2023.

The statement also noted improvements in the country’s reserves:

To address challenges related to exchange rate stability, the MMA is taking steps to reduce the MVR 6.7 billion surplus liquidity in the banking system through the use of monetary instruments. The central bank plans to commence Open Market Operations within the year to manage this surplus liquidity.

In addition, revisions to the monetary regulation will be announced later in September, aimed at increasing the amount of foreign currency flowing into the domestic banking system.

The MMA also reaffirmed the government’s capability to meet its external bond repayment obligations. Specifically, the upcoming bond repayment in October 2024 will be serviced in full by the due date.

The MMA assured that there is no doubt about the ability of the government, in collaboration with all related government institutions, to meet all future external debt obligations.