News Desk
MALE’ — Fitch Ratings has upgraded the Maldives’ credit rating from CC to CCC-, citing the successful repayment of the country’s USD 500 million Sukuk in April as the primary factor behind the decision.
The upgrade, one notch on the rating scale, signals that the immediate risk of the Maldives defaulting on its external debt obligations has receded. A CC rating implies a country is in or near default. A CCC- rating means that risk, while still present, is no longer immediate.
Fitch said the Sukuk repayment was a significant achievement and that the severe financial risks the country had been facing have been substantially reduced as a result. The agency also noted that the Maldives’ outstanding external debt has decreased considerably following the repayment, and that increased financial assistance from foreign partners will support the rebuilding of reserves.
The repayment covered more than the Sukuk itself. The government also cleared USD 400 million in currency swaps with the Reserve Bank of India and a USD 50 million instalment on bonds sold to the State Bank of India, bringing total debt cleared in a short period to close to USD 1 billion without taking on new foreign borrowing.
The Finance Ministry said the rating change reflects growing confidence in the government’s efforts to stabilise public finances. It pointed to two key policy changes as central to the improvement. An amendment to the foreign exchange law now requires businesses earning income in foreign currency to convert a portion of their revenue through the Maldivian financial system. By the end of March, foreign currency reserves held through the financial system had reached USD 1.3 billion as a result. The government also rebuilt the Sovereign Development Fund, which had been weakened after a large portion of its dollar holdings were converted into rufiyaa in 2020. By early April the SDF held over USD 400 million, providing the firepower to settle the Sukuk without new borrowing.
Fitch first rated the Maldives in 2016 at B+. The rating held steady through 2018 before the outlook was revised to negative in 2019. The pandemic triggered a series of downgrades, from B+ to B in March 2020, then to CCC later that year. By August 2024 the rating had fallen to CC. Tuesday’s upgrade to CCC- is the first upward move in that sequence.
The one-notch improvement rather than a larger jump reflects the broader global context. Fitch noted that international economic uncertainty is weighing on its assessment, and the Maldives as a small, tourism-dependent island economy is more exposed to external shocks than most. The rating remains deep in non-investment grade territory and borrowing on international markets will still be difficult and expensive.
But the direction has changed. For a country that was staring at a possible sovereign default eighteen months ago, moving off the CC floor is a meaningful signal that the fiscal strategy, however painful in its implementation, is producing results that credit markets are beginning to recognise.
