Maldives says confident of mitigating risks amid Moody's rating cut

Maldives' finance ministry on Wednesday said the government remains confident of mitigating financial and economic risks, 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 to the downgrade, the finance ministry said the government has completed the required technical work and is preparing for the implementation of measures aimed at restoring fiscal and debt sustainability and mitigating risks to the external sector.

The government continues to receive technical assistance from multilateral agencies in the formulation and implementation of these reforms, with a particular focus on poverty reduction and improving the standard of living for the most vulnerable.

The government has recently concluded deliberations on the restructuring of State-Owned Enterprises to enhance efficiency and alleviate fiscal pressures.

“The government remains confident that the risks on the fiscal and external sectors can be mitigated, while improving the socioeconomic conditions with the implementation of the planned fiscal consolidation measures," the statement read.

The government also highlighted its ongoing engagement with bilateral and multilateral partners to meet financing requirements and maintain positive relationships with all investors.

With the expected economic growth driven by the strong performance of the tourism sector, coupled with the successful implementation of revenue and expenditure measures, the government says it remains confident in restoring fiscal and debt sustainability.

Meanwhile, Maldives Monetary Authority (MMA), the central bank of the Maldives, on Wednesday said the government is capable to meet its external bond repayment obligations.

This is the second rating downgrade for Maldives by a global credit rating agency in less than a month. 

In late August, Fitch downgraded the Maldives' Long-Term Foreign Currency Issuer Default Rating (IDR) from CCC+ to CC, signalling concerns over pressures on the nation's external and fiscal sectors.

The downgrade by Fitch is a reflection of the challenges the Maldives faces, particularly in managing its external debt obligations and ensuring fiscal stability.

However, the government has assured that it remains committed to addressing these issues through a series of comprehensive fiscal consolidation measures.