Fitch Ratings has upgraded the Maldives’ Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC-’ from ‘CC’, citing reduced default risks following the successful repayment of the country’s USD500 million sukuk in April and improvements in its near-term external financing outlook.
The ratings agency said the upgrade reflects a lower risk of default after the government met its largest external debt obligation of the year and continued implementing measures aimed at strengthening foreign currency inflows, including revenue reforms and the Foreign Currency Act.
According to Fitch, the Maldives’ ability to service external debt has improved considerably following the sukuk repayment, with sovereign and publicly guaranteed external debt obligations falling to USD535 million in the second half of 2026, compared with USD1.1 billion in the first half of the year.
The agency also noted that the government had secured additional external financing support, including the rollover of a USD100 million private placement with the Abu Dhabi Fund until 2031 and a separate USD100 million financing facility from an Omani creditor to support energy security.
Despite the upgrade, Fitch warned that the Maldives continues to face significant economic vulnerabilities.
The agency highlighted the country’s high public debt, wide fiscal and current account deficits, low foreign exchange reserves and heavy dependence on tourism-related earnings. It also noted the Maldives’ exposure to external shocks, including higher energy prices linked to ongoing tensions in the Middle East.
Fitch reported that the government used USD350 million from the Sovereign Development Fund and USD175 million from usable foreign exchange reserves to settle the sukuk principal and final coupon payment in April. As a result, usable reserves declined to USD244 million by the end of April, while gross reserves fell to USD718 million from USD1.3 billion a month earlier.
The ratings agency projects that the Maldives’ current account deficit will widen sharply to 17.5 percent of GDP in 2026, up from 8.4 percent in 2025, driven by higher import costs and weaker services exports amid global economic disruptions.
Fitch also forecast the fiscal deficit to increase to 14.6 percent of GDP this year, significantly above the government’s target of 7.1 percent, reflecting weaker tourism-related revenue, rising energy subsidy costs and increased capital expenditure.
Public debt is expected to rise further, reaching 119.2 percent of GDP in 2027, according to Fitch’s projections.
The agency said the Maldives remains reliant on support from bilateral and multilateral partners, as international market borrowing remains prohibitively expensive. It added that any future support from the International Monetary Fund would likely depend on credible fiscal consolidation measures and debt management reforms.
Fitch nevertheless pointed to factors that could support future upgrades, including stronger external reserves, sustained access to foreign financing and meaningful progress in reducing public debt through fiscal consolidation.
Responding to the rating action, the Ministry of Finance and Public Enterprises said the upgrade reflects growing confidence in the Maldives’ economic management despite challenges posed by the global environment.
The ministry acknowledged that ongoing conflict in the Middle East has created economic headwinds but said the Maldives is better positioned to withstand external pressures due to recent fiscal and monetary policy reforms and an improved liquidity outlook.
It also stated that the government has taken steps to protect economic activity, maintain spending within approved budget limits and strengthen economic infrastructure to support long-term growth, resilience and sustainability.
Fitch does not assign outlooks to sovereign ratings at ‘CCC+’ or below. The agency maintained that while default risks have eased, the Maldives’ credit profile remains constrained by persistent fiscal and external vulnerabilities.
