Moody’s Ratings has affirmed the Maldives’ long-term local and foreign currency issuer ratings at Caa2 while revising the outlook to stable from negative. The change reflects the agency’s view that external liquidity pressures have eased following higher foreign currency receipts, stronger tourism inflows, and the accumulation of assets in the Sovereign Development Fund (SDF).
The long-term foreign currency backed senior unsecured rating for Maldives Sukuk Issuance Limited was also affirmed at Caa2 with a stable outlook. The entity’s obligations are considered the responsibility of the Government of Maldives.
Moody’s said the improvement in outlook was driven by a notable recovery in foreign exchange reserves and SDF holdings. Official reserves stood at 859 million dollars in October 2025, up from 364 million dollars in September 2024, covering around three months of imports. The SDF’s USD cash balance rose to 126 million dollars by early November, compared with just 15 million dollars a year earlier. The agency attributed this improvement partly to late-2024 reforms, including increases in dollar-denominated taxes and fees, as well as regulations requiring operators in the tourism sector to convert dollar earnings into rufiyaa.
According to MIRA, dollar revenue reached 1.2 billion dollars by October 2025, a 39 percent increase compared to the previous year. The government also continued to access bilateral financing, largely from India, including debt rollovers, a 400 million dollar currency swap, and a rupee-denominated credit line worth 565 million dollars.
Despite the improved external position, Moody’s noted that financing risks remain due to sizeable upcoming obligations. External debt service in 2026 amounts to around 950 million dollars, a level that will continue to place pressure on foreign exchange resources. Government debt stood at 114 percent of GDP in 2024, close to its pandemic-era peak. Short-term domestic debt has also risen sharply, reaching nearly 40 percent of GDP, heightening refinancing risks.
The agency observed some progress in fiscal consolidation. Capital expenditure had reached MVR 4.2 billion by late October, about half of 2024 levels and far below the 2025 budget allocation. Revenue grew by around 9 percent year-on-year, enabling a balanced budget on a year-to-date basis. Moody’s expects the 2025 fiscal deficit to narrow to around 5 to 5.5 percent of GDP from about 10 percent in 2024, though deficits are projected to average around 5 percent over the medium term. Public debt is expected to remain above 100 percent of GDP for the next several years.
Moody’s also highlighted the Maldives’ exposure to environmental and social risks, including climate vulnerability, demographic pressures, and gaps in public service provision, especially in the atolls. Governance challenges persist, although recent improvements in budget transparency and anti-corruption measures were acknowledged.
The rating agency said an upgrade could follow if the Maldives demonstrates sustained improvement in its fiscal position, reduces debt and deficits, and diversifies its economy beyond tourism. A downgrade could occur if external financing weakens, external buffers erode, or fiscal consolidation efforts stall.
