Credit negative, says Moody’s over Maldives’ State of Emergency

  • Prompted to revise GDP growth of 4.5 percent
  • Growth slowed down following declaration
  • Development is credit negative

K. Male' | Rushdha Rasheed | 13-February-2018 | Tuesday 00:56 | rushdhar | Local | 2,796

Officers on street during political crisis -- Photo by: Mohamed Sharuhaan

The ongoing political turmoil is a ‘credit negative’ for the nation, said rating agency Moody’s

Moody's issued the analysis on Monday, highlighting several issues in the current economic landscape for Maldives.

"If tourists are deterred from travelling to Maldives for a prolonged period, the crisis will reduce growth and prompt us to revise down our current forecasts of 4.5 per cent real GDP growth in 2018. Tourism accounts for one-third of economic output," the report said.

Moody’s noted that in the past this was seen as well: with growth having slowed down to a mere 2.8 percent during the State of Emergency back in 2015. The percentage during the year before six percent.

"This development is credit negative for the sovereign because it undermines the rule of law by overriding, for apparent political considerations, a decision by the judiciary," the report said.

The travel advisories issued by nations such as India, China, Singapore and the UK are another factor that is likely to exacerbate the situation, the report said.

"Tighter financing of government debt would be particularly credit negative, given Maldives' sizable debt burden, which we estimate was 62.8 per cent of GDP in 2017. According to 2016 data, multilateral institutions held 9.8 per cent of public-sector debt, while bilateral lenders held 22.3 per cent. Smooth funding disbursement from these lenders is crucial for the financing of the government's large-scale infrastructure development program," the report said.

Continued political crises, the report noted, can devalue Maldives as an investment platform. It further noted that lenders could also opt to slash funding given the volatile political situation.

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