Maldives’ debt burden to reach 70% of GDP by 2020: Moody's

Moody's Investors Service credit profile shows that Maldives’ debt burden will be close to 70% of GDP by the turn of the decade.

In the announcement on Tuesday, Moody’s said that the B2 negative credit profile of the Government of Maldives reflects healthy growth and competitive tourism sector.

However, the investors service said that robust growth has been accompanied by budget and current account deficits, in large part because of a significant increase in infrastructure spending.

“Moreover, the country's debt burden has risen sharply over the past two years to levels above the median for B-rated sovereigns.”

Moody's said they changed the outlook on the Maldives' sovereign rating to negative from stable in July to reflect the liquidity and external vulnerability risks that the country faces, stemming from the sharp rise in government debt.

“These risks will likely extend to at least the beginning of the next decade, when a large-scale infrastructure program is due to be completed.” “While the negative outlook on the sovereign rating means that a rating upgrade is unlikely in the near term, Moody's would consider stabilizing the outlook if: (1) a less pronounced increase in the debt burden and funding needs than Moody's currently expects; and/or (2) access to external and domestic funding sources appears increasingly secure and likely to pose less of a strain on debt affordability.”