Moody's cuts Maldives, view to stable

Moody's Investors Service said it lowered the government of Maldives’ long-term local- and foreign-currency issuer and long-term foreign-currency senior unsecured ratings to Caa1 from B3 and changed the outlook to stable from negative.

Moody's concurrently downgraded the backed senior unsecured rating for Maldives Sukuk Issuance Ltd. to Caa1 from B3. The entity is a special purpose vehicle wholly-owned by the ministry of finance on behalf of the government of Maldives. The agency said it considers its debt and trust certificates ultimately the obligation of the government of Maldives.

“The downgrade to Caa1 reflects the deterioration of fiscal strength beyond Moody's initial expectations, stemming from the significant increase in the debt burden during the coronavirus pandemic, the prospect for large fiscal deficits in the coming years, and over time, the risk of higher interest costs associated with the debt burden and greater commercial borrowing. The rating also reflects Moody's expectations that, even with a robust rebound in tourism arrivals in the coming quarters, the debt burden will only gradually decline on expectations that the government will maintain an expansionary, investment-driven fiscal policy that will repeatedly test the government's access to a diverse set of funding sources,” the agency said in a press release.

The stable outlook reflects that the risks to the Caa1 rating are balanced between ongoing fiscal pressures with the improving prospects of the tourism sector, which will support recoveries in growth and employment, Moody’s said.

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