Credit Rating firm Fitch has changed the ranking on Maldives from CCC to CC. Fitch revealed the Maldivian foreign exchange reserves fell by 20%, dropping to USD 395 million in July from USD 492 million in May.
In its report, Fitch highlighted the significant extent of the Maldives' external debt. The total external debt is projected to rise to USD 557 million by 2025 and could potentially reach USD 1 billion in the future. This includes a USD 500 million sukuk that will need to be repaid.
The report also noted an increase in domestic debt, attributed to heightened government spending on projects and the rising costs of importing food, oil, and other commodities. This surge in expenditure has driven up the demand for US dollars, exacerbating the country's financial challenges.
Fitch's report also suggested measures to improve the current financial situation. It emphasised that currency swap arrangements with strategic bilateral partners could facilitate foreign financial assistance to the Maldives. Additionally, the government is urged to develop a comprehensive fiscal strategy aimed at stabilising the economy.
The report acknowledged the Maldivian government's efforts to address these challenges, particularly through the medium-term fiscal and debt strategy submitted to Parliament. Fitch noted that these initiatives will be crucial in helping the country navigate its current financial difficulties and in resolving long-standing systemic issues.