Fitch maintains 'junk' rating as fear of Maldives defaulting on debt grows

One of the world’s largest credit rating agencies, Fitch Ratings has maintained the Maldives' credit rating at "CC" again, considering the extremely high risk of default.

A 'CC' rating is given when there is a high risk of default and bankruptcy. The next lower rating is 'C', which is given when bankruptcy is certain. The 'CC' rating given to the Maldives indicates a high risk of default.

Fitch downgraded the Maldives' rating twice last year. As such, the rating that was at "B-" in 2023 and 2022 was downgraded to "CCC+" in June of last year. Then again in August of last year, the Maldives' rating was lowered to "CC".

The biggest concern highlighted in that review was the risk that the Maldives might not be able to pay the large debt due this year and next year. As such, this year alone USD 688 million is due on foreign debt, while next year that amount will rise to USD 1.1 billion.

The Fitch review stated that the CC rating indicates that there is a risk of default in some form.

The Fitch review noted that although foreign currency reserves have increased due to the currency swap agreement with India's central bank, RBI, and improved tourism, there are challenges in repaying the large debts due next year.

As such, Fitch noted that reserves, which had fallen to USD 371 million in September 2024, increased to USD 856 million in April 2025.

This increase came from the USD 400 million received under the currency swap agreement signed with RBI, increased revenue from the tourism sector, and changes forcing resorts to convert dollars, according to the rating review.

The rating commentary states that without including the USD 400 million currency swap provided by the Indian government, the Maldives' usable reserves stood at USD 28 million.

Fitch noted that after deducting the payments due in the next 12 months from the reserves, only USD 28 million would remain. That is not an adequate amount for a country.

Fitch has projected that the Maldives' debt as a percentage of GDP will reach 125 percent next year.

However, Fitch has noted that the Maldives' economy is growing. As such, while the economy is growing at 4.8 percent this year, it is projected to grow by 4.7 percent next year as well. The review also noted that the opening of the new terminal at Velana International Airport (VIA) will also contribute to economic growth.

Fitch has highlighted that foreign currency reserves need to be increased to improve the rating. And the review noted that if spending is reduced and robust fiscal reform measures are taken, the rating could also be improved.

While noting that the Maldives will need assistance from various foreign parties to repay foreign debt, Fitch has also advised further reducing government expenditure due to the challenges faced in debt repayment.