Moody’s Ratings has completed its periodic review of the Maldives’ credit rating, maintaining its Caa2 long-term issuer rating with a negative outlook, citing persistent external liquidity risks and mounting refinancing challenges despite a modest improvement in foreign reserves.
The Caa2 rating sits deep in the non-investment grade category, often referred to as “junk” territory, signalling very high credit risk. It indicates that the country is judged to be vulnerable to default, particularly in the absence of reliable external financing. A negative outlook means the rating is more likely to be downgraded than upgraded in the near term.
The review, concluded on 8 May, does not announce a new rating action but reaffirms the fragile financial footing of the island nation. While reserves have edged up since October 2024, Moody’s flagged concern over looming repayment obligations, especially a $500 million sukuk due in 2026.
The agency stated that without stable and affordable access to external financing, the Maldives risks slipping further into default territory. Current account deficits remain wide, and although recent reforms and fuel price declines have offered some breathing space, the ability to refinance debts remains uncertain. Volatile global market conditions, including unpredictable US policy shifts, could further complicate access to capital.
Moody’s assessed the country’s economic strength at “ba1,” supported by a strong post-pandemic rebound in tourism. However, the assessment noted that beyond tourism, the Maldives lacks competitiveness, making its economy more vulnerable to external shocks. The country’s exposure to climate risks also adds to its long-term vulnerability.
Institutional and governance strength was scored at “b3,” reflecting the structural challenges faced by a small, dispersed island state in building regulatory and administrative capacity. Meanwhile, fiscal strength remains at “ca” due to debt levels exacerbated by the pandemic and ongoing spending rigidities, particularly in subsidies and capital projects.
The agency said a downgrade could be triggered if the Maldives fails to secure external financing or if reforms do not effectively build up foreign currency reserves. Conversely, if the government demonstrates progress in fiscal consolidation and gains steady access to external funds, the rating could stabilise.
Moody’s will issue another formal update during its next scheduled periodic review, unless material changes in the country’s credit conditions prompt an earlier reassessment.
