The government has committed to implementing the recommended measures proposed by the rating agencies and is actively working on cost-cutting strategies within state-owned enterprises to bolster financial stability.
The Maldives Monetary Authority (MMA) has sought to reassure the public and investors that the country remains capable of meeting its debt obligations, despite recent credit rating downgrades by Moody’s and Fitch Ratings earlier this week.
Moody’s downgraded the Maldives’ credit rating from CAA1 to CAA2, placing it on review for potential further downgrades. This move reflects concerns about the country’s external liquidity position and its capacity to manage debt. Fitch Ratings has also downgraded the Maldives’ rating from CCC to CC.
In response to these concerns, the MMA issued a statement underscoring the country’s economic resilience and debt repayment capacity. The central bank projected that the Maldives’ Gross Domestic Product (GDP) would grow by 4.9 per cent in 2024 and accelerate to 6.5 per cent in 2025, driven by robust performance in the tourism sector and the new terminal’s opening at Velana International Airport (VIA).
The MMA highlighted that by the end of August 2024, total tourist arrivals had surpassed 1.3 million, marking a 10 per cent increase compared to the same period in 2023. Additionally, the average duration of tourist stays rose by 7 per cent in July 2024 compared to the previous year, signaling a positive trend in tourism.
Open Market Operations
The central bank noted improvements in both gross international reserves and usable reserves. It expects the usable reserves, currently at USD 61 million, combined with the Sovereign Development Fund (SDF) balance, to push gross international reserves above the USD 606 million forecasted in the 2024 state budget.
To address concerns about exchange rate stability and manage liquidity, the MMA plans to reduce the MVR 6.7 billion surplus liquidity in the banking system. This will involve implementing Open Market Operations later this year. Furthermore, the MMA is preparing to revise monetary regulations to enhance the inflow of foreign currency into the domestic banking system, with announcements expected within the month.
The MMA assured that the Maldives is prepared to meet its external bond repayment obligations due in October 2024. “The MMA reaffirms the capability of the Government to service the upcoming external bond repayment in October 2024 and extends complete assurance that the obligation will be met in full by the due date,” the statement said.
The government has committed to implementing the recommended measures proposed by the rating agencies and is actively working on cost-cutting strategies within state-owned enterprises to bolster financial stability.
