Moody's, the global credit rating agency, has affirmed the Maldives' credit rating at CAA2, signalling confidence in the government's ongoing economic reforms and financial measures. This decision comes after the rating agency adjusted the nation's credit rating from CAA1 to CAA2, in September. Despite the challenges of foreign debt repayments, Moody’s has opted not to downgrade the rating further, citing the implementation of significant economic reforms.
The agency noted that the government's strong economic measures, including new foreign exchange regulations introduced by the central bank and comprehensive tax reforms, are expected to bolster the country's foreign exchange reserves. These efforts, along with recent successes in securing foreign currency financing, are likely to improve the financial outlook. Notably, the country signed a currency swap agreement with India in September, valued at USD 400 million. These steps are expected to provide crucial support for the nation’s financial stability.
While the credit rating was maintained at CAA2, Moody's cautioned that the nation would face continued challenges related to foreign debt repayments, with significant outflows anticipated in the near term. However, the credit agency emphasized that the future stability of the country's credit rating will depend on its ability to secure further foreign currency financing and successfully implement fiscal reforms, particularly those outlined in the 2025 budget approved by Parliament.
Moody's previous downgrade from CAA1 to CAA2 was driven by an accumulation of large debts taken on by previous administrations, the excessive printing of currency, increased demand for foreign currency, and the difficulties in maintaining a stable exchange rate. Nevertheless, the decision to maintain the current rating reflects the government’s continued efforts to strengthen the nation's financial position.