Moody’s Ratings has affirmed the Maldives’ long-term credit rating at Caa2 while upgrading the nation’s outlook from Negative to Stable, signalling renewed confidence in the government’s efforts to stabilise a previously fragile fiscal landscape.
The upgrade reflects Moody’s recognition of the administration’s robust fiscal reforms, effective policy decisions over the past year, and clear commitment to strengthening the country’s debt repayment capacity. According to the agency, these measures have significantly reduced the immediate risks surrounding the Maldives’ fiscal position.
For years, the Maldives faced mounting macroeconomic pressures, characterised by spending outpacing revenue, heavy reliance on foreign currency borrowing, and dwindling reserves—all of which heightened the threat of debt distress. Moody’s noted that the recent improvement stems from deliberate fiscal and monetary adjustments, including targeted revisions to key taxes and fees such as the airport tax, green tax, and TGST, aimed at boosting foreign exchange income. Strengthened foreign exchange regulations have also improved reserve levels and overall liquidity.
A clear indicator of progress is the Sovereign Development Fund (SDF). Once holding just USD 15 million last year, its foreign exchange cash balance surged to USD 126 million by 9 November 2025, driven by policy changes and improved revenue mobilisation. The government has also curbed spending, successfully narrowing the current year’s budget deficit.
Importantly, these reforms have not hindered economic growth. The tourism sector continues to flourish, with tourist arrivals up 10 percent and overnight stays increasing by 7.2 percent as of September.
While the Caa2 rating remains due to the Maldives’ high public debt, the stable outlook points to a positive medium-term path. The government’s 2026–2028 budget plan prioritises reducing the deficit to a sustainable level, improving debt dynamics, and utilising the SDF for annual debt repayments. The administration has also laid out detailed plans to repay USD 500 million in Sukuk and other maturing debt in 2026, signalling its resolve to bring down the debt-to-GDP ratio.
Moody’s further highlighted renewed confidence from international partners. Despite earlier challenges in accessing foreign financing, the Maldives has successfully secured funding through reciprocal and bilateral channels, reflecting growing trust in the government’s financial management.
The administration has reaffirmed its commitment to strict revenue discipline, expenditure control, and sustained macroeconomic stability—measures aimed at restoring long-term fiscal and debt sustainability
