Credit rater assigns Maldives a 'B+' and stable outlook

Credit rating agency, Fitch Ratings, has assigned Maldives’ short-term- credits a ‘B+’ rating and described its global economic outlook to be stable.

Fitch Ratings analyses an economy to calculate its credit risk - the propensity for it to default on loans.

“The ratings balance the Maldives' advanced economic development, strong GDP growth and high government revenue generated by a prosperous tourism sector against a high government debt burden and low foreign-reserve buffers” Fitch Rating’s report on Monday said.

The US-based agency had also noted that the bulk of Maldives’ income is from one industry and that this makes it vulnerable to changes in the sector – such as external reputation and destruction of tourism assets.

Maldives’ reliance on tourism is further highlighted as Fitch mentions how the state’s foreign reserves are low, and that usable reserves are mitigated by direct foreign investment and foreign currency garnered from tourist outlets.

A ‘B’ classification means that the Maldivian financial situation is dependent upon varying factors and is vulnerable to short-term adverse changes in financial and economic conditions.

“The Stable Outlook reflects Fitch's assessment that upside and downside risks to the ratings are balanced” the report further said.

Fitch commended government policies that could significantly push down fiscal deficit, though the amount it states is not as low as Maldives predicted.

The agency recommends that Maldives should lower government debt, strengthen external buffers by increasing foreign reserves, and diversify the economy.