Maldives’ rating downgraded to negative
The decision to downgrade Maldives’ outlook is due to the “sharp rise in the government's debt burden"
Maldives Monetary Authority
Moody's Investors Service on Wednesday changed the outlook on Maldives’ issuer rating from stable to negative.
In their findings, Moody’s stated that the decision to downgrade Maldives’ outlook is due to the “sharp rise in the government's debt burden that is expected to extend at least until the beginning of the next decade”.
The investors service stated that the government’s development projects is straining limited financing sources, which includes the domestic banking system and external investors, to meet the sizeable financing needs required by the infrastructure program.
“These risks could rise in the run-up to repayments on a sovereign bond that are due in 2022. In addition, the strain on Maldives' fragile external position could increase in the next few years, if large imports as part of the investment projects are not fully financed by capital inflows in a timely manner and/or the exchange rate appreciates again in real effective terms.”
Moody’s stated that the national debt is likely to grow as the government of Maldives borrows more to finance its infrastructure program without increasing the nation’s income.
International financial organizations have been repeatedly warning Maldives on its growing debt, including the International Monetary Fund (IMF) and the World Bank.
Despite this, Saudi Arabia and China continue to give huge loans to the Maldives government to fund its development projects and experts warn that it is likely that Maldives would be unable to repay the loans, which might result in the small island nation having to sell property and land.
