Credit rating agency, Fitch Ratings, has downgraded Maldivs’ Housing Development Corporation (HDC) Long-Term Foreign-Currency and Local-Currency Issuer Default Ratings to 'CCC' from 'B’.

A report published by Fitch on Thursday notes that HDC's ratings “are equalised with those of Maldives due to its significant linkage and strategic importance to the government, reflected by an overall support score of 50 under our Government-Related Entities Rating Criteria”.

The rating was reduced after an assessment of the company's 'Weak' revenue defensibility, 'Midrange' operating risk and 'Weak' financial profile are unchanged.

Fitch said that “the revised SCP reflects the rising external liquidity pressures of the government may negatively affect the company's future financing”.

The rating by Fitch for HDC had been maintained at “B Plus” since March 2019.

The announcement comes shortly after the agency reduced Maldives’ Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'CCC' from 'B', earlier this month.

Fitch’s report published on November 5 noted that the downgrade of Maldives’ IDR was based on its projections following Covid-19 impacts on the country’s economy.

It said that this was following “the expectation of deeper and more prolonged external liquidity pressures than previously forecast, and a sharp increase in the country's debt burden as a result of the coronavirus shock and continued debt-funded infrastructure spending”.

The report reads, “in recent months, the authorities have succeeded in securing new external financing, but foreign-currency buffers remain low and it will be difficult for the Maldives to generate foreign-exchange inflows without a normalisation of tourist activity.

This shock has made the country heavily dependent on the international community for support through bilateral and multilateral financing. Risks surrounding the sovereign's ability to meet its debt service obligations have increased, in Fitch's view”.

While Fitch expects Maldives economy to contract by 30.0% this year, its report highlights the recovery of the country’s most lucrative industry, the tourism industry “is likely to be delayed and much more gradual than we previously assumed”.