According to the Finance Ministry, in order to restore fiscal and debt sustainability and mitigate the risks to the external sector, the Government has already completed the required technical work, and preparations for implementation are currently underway.
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2024 is proving to be a financially tough year for the Maldives as the country has already been downgraded by Fitch ratings twice within the year, leaving the Maldives’ Long-Term Foreign-Currency Issuer Default Rating (IDR) downgraded to ‘CC’ by September. Although the country started off with a rating at ‘B-’ at the start of the year, as the Maldives continues to grapple with its increasing debt situation, it appears that things may yet take a turn for the worse before things turn around as Moody’s Ratings (Moody’s) has also downgraded the Maldives’ Long-Term Local and Foreign Currency Issuer Rating from ‘Caal’ to ‘Caa2’.
Although the Government of the Maldives has been attempting to take measures to reform its fiscal policies to manage the evolving debt crisis, this downgrade in the Moody’s Rating strongly reflects that the country continues to face pressures regarding the gross international reserves, the expectation of continued twin deficiencies in light of high commodity prices, challenges of financing as well as delays in the implementation of fiscal reform.
In regards to the downgrade in Moody’s Rating as well as the downgrade in Fitch Ratings, the Maldivian Government continues to work towards taking the necessary measures. According to the Finance Ministry, in order to restore fiscal and debt sustainability and mitigate the risks to the external sector, the Government has already completed the required technical work, and preparations for implementation are currently underway. Additionally, the Ministry also reported that the Government continues to receive technical assistance from multilateral agencies in the formulation and implementation of these reforms, with particular focus on poverty reduction and improvement in the standard of living of the most vulnerable.
Another one of the notable measures taken by the Government in the past few weeks also includes the deliberations on the restructuring of State-Owned Enterprises aimed at enhancing efficiency and alleviating pressures on the fiscal sector. In order to achieve this goal, the Government has already merged the FENAKA corporation into the State Electric Company Ltd (STELCO), merged the Fahi Dhirulhun Corporation (FDC) into the Housing Development Corporation (HDC) as well as merging of the Business Center Corporation (BCC) into the Fund Management Corporation. Furthermore, the Government has also taken additional steps by dissolving two SOEs - AgroNet and the Maldives Integrated Tourism Development Corporation (MITDC).
With this, the Government states that they remain confident that the risks in the fiscal and external sectors can be mitigated while improving socioeconomic conditions with the implementation of the planned fiscal consolidation measures. In addition to the measures that have already been taken, the Government also continues to engage with bilateral and multilateral partners to meet the financing requirements while maintaining positive relationships with all the investors.
