The Ministry of Finance has announced an ambitious goal to reduce the national debt to 90% of Gross Domestic Product (GDP) over the next five years. In addition, Fitch Ratings Inc. has upgraded the Maldives' credit rating from CCC+ to CC, reflecting both challenges and anticipated economic sustainability.
In a statement, the finance ministry acknowledged that Fitch's rating highlights ongoing concerns about the current fiscal and external sectors, despite expectations for economic recovery. In response, the government is revising its revenue and expenditure policies comprehensively to address these issues and implement strategies to reduce debt in the medium term.
The ministry emphasised that strengthening the financial sector is key to improving the country’s financial health and restoring debt sustainability. This effort is expected to be supported by growth in tourism and the overall economy. To boost revenue, the government plans to increase airport taxes, green tax rates, and import duties on certain unhealthy products. Additionally, amendments to the GST Act will expand the tax base and increase foreign exchange earnings through the Tourism Goods and Services Tax (TGST), contributing to the Sovereign Development Fund (SDF) and easing foreign currency debt repayment.
The government is also preparing policies aimed at managing public spending sustainably. These efforts include reducing inefficiencies in state-owned enterprises (SOEs), replacing indirect subsidies with direct subsidies targeted at those in need, strengthening the national health insurance system, implementing fuel hedging policies, and cutting discretionary government expenditures to mitigate the impact of volatile global oil prices.
The government is working diligently to enhance the country’s financial stability, with several loans due to various international agencies in the coming months.