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Investing.com -- Fitch Ratings has affirmed the Maldives’ Long-Term Foreign-Currency Issuer Default Rating at ’CC’ on Thursday, pointing to probable default risk within the rating horizon due to external financing challenges.
The Maldives faces $688 million in sovereign and public guaranteed external debt obligations due in the second half of 2025. This amount, combined with $356 million due in the first half of 2025, represents a significant increase from an estimated $436 million in 2024. External debt servicing will further rise to about $1.1 billion in 2026, including a $500 million sukuk repayment in April 2026.
The country’s foreign exchange reserves improved to $856 million in April 2025, up from a record low of $371 million in September 2024. This increase was primarily driven by a $400 million drawdown under a currency swap arrangement with the Reserve Bank of India (NSE:BOI) signed in October 2024, along with tourism-related receipts and the new Foreign Currency Act.
Despite this improvement, Fitch estimates the Maldives’ gross foreign-reserve coverage at roughly 1.5 months of current external payments, well below the ’B’/’C’/’D’ category median of 3.5 months. Net reserves remain low at $28 million after accounting for short-term foreign liabilities.
The rating agency projects the current account deficit will decrease to 14.0% of GDP in 2025 from an estimated 17.9% in 2024, supported by tourism receipts and lower fuel prices. The fiscal deficit is expected to widen to 14.5% of GDP in 2025 from 14.0% in 2024 due to high recurrent spending.
General government debt is forecast to rise to 125.1% of GDP in 2026 from an estimated 114.5% in 2024, almost double the projected median for peer countries. Government-guaranteed debt increased to 19.5% of GDP in 2024, up from 14.9% in 2023.
Economic growth is projected to remain robust at 4.8% in 2025 and 4.7% in 2026, primarily driven by rising tourist arrivals and the partial opening of the new passenger terminal at Velana International Airport as early as July 2025.
The Maldives Monetary Authority has raised the mandatory exchange requirement for banks’ U.S. dollar proceeds from tourism-related businesses to 90% from the previous 60% under the new Foreign Currency Act to improve dollar liquidity for essential needs.
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