Fitch Ratings Inc., an American credit rating agency, has now downgraded Maldives’ long-term foreign-currency Issuer Default Rating (IDR) from ‘B’ to ‘CCC’.
According to Fitch, “the downgrade of the Maldives’ IDRs to ‘CCC’ reflects Fitch’s expectation of deeper and more prolonged external liquidity pressures than previously forecast, and a sharp increase in the country’s debt burden as a result of the coronavirus shock and continued debt-funded infrastructure spending.”
This downgrade comes after a previous downgrade in March, from an IDR of ‘B+’ to ‘B’. Fitch stated the rating decrease at the start of the pandemic was due to the fact that the tourism sector which accounts for about 25% of GDP, was forecasted to come to a halt and result in inevitable recessionary effects to the economy.
However, in a statement released yesterday by the Ministry of Finance, it was stated that “Maldives has never defaulted on our debt obligations thus far, which is a distinction that we plan to hold into the future. We are fully committed to ensure that principal and interest for our sovereign bonds are paid fully and in a timely manner.”
The statement adds that with the tourism industry restarting in July, though slow by pre-pandemic standards, guest arrivals have been improving with each passing month.
From less than 2,000 arrivals in July, the arrivals have increased to 21,000 in October. Furthermore, with the government “proactively working to re-invigorate the tourism sector” by arranging more flights and easing travel restrictions, these numbers are projected to exponentially increase within the upcoming holiday season.
