Fitch Ratings on Thursday affirmed the Maldives’ long-term foreign currency issuer default rating at ‘CC’ with a stable outlook, citing high default risk due to heavy refinancing needs, weak external liquidity, and limited fiscal buffers.
“A default event of some sort remains probable within the rating horizon,” Fitch said in its rating action commentary, pointing to persistent external and fiscal vulnerabilities that continue to weigh on the country’s ability to refinance large upcoming debt obligations.
The ratings agency said the Maldives remains exposed to external shocks through its tourism-driven economy, and flagged fragile public finances and continued dependence on external financing. While bilateral and multilateral support has delayed a default, Fitch warned that the country’s financial outlook remains “precarious.”
“The government may succeed in securing further external financing from strategic creditors, given the country’s geopolitical importance,” the agency added, but noted that such support would not resolve underlying fiscal weaknesses.
According to Fitch, the country’s foreign reserves rose to $856 million in April, supported by a $400 million currency swap with the Reserve Bank of India, which eased near-term liquidity pressures. However, gross international reserves stood at just $499 million at end-April—enough to cover less than two months of imports.
Government debt is projected to ease slightly to 109% of GDP in 2025, from 112% the previous year, as spending trims and firmer revenues offer some fiscal breathing room, the agency said, adding that the burden of servicing that debt remains heavy, with interest payments consuming around a quarter of government income.
Fitch estimates the Maldives’ foreign reserves cover only about 1.5 months of external payments—far short of the 3.5-month median for countries with similar credit ratings. Public debt, meanwhile, is on track to rise again, reaching 125.1% of GDP in 2026 from 114.5% in 2024, as fiscal pressures persist.
The economy is expected to grow 4.8% in 2025, fuelled by a steady rise in tourist arrivals and ongoing infrastructure projects, but the agency warned any slowdown in key source markets could weigh on that outlook.
Meanwhile, the Maldives is staring down $688 million in external debt repayments in the latter half of 2025, including dues tied to its currency swap arrangement with the Reserve Bank of India. A $500 million sukuk matures in April 2026. Fitch said a lack of market access and weak governance continue to hamper the country’s refinancing options.
“Significant progress in implementing a credible fiscal consolidation strategy is essential to place debt on a downward path over the medium term,” the agency said. Although support from key partners—particularly India—has helped ease immediate liquidity strains, Fitch said the Maldives’ structural fiscal challenges remain unaddressed.
Fitch said the current account deficit is expected to narrow to 14% of GDP in 2025, down from 17.9% this year, as strong tourism income and falling fuel import costs provide some temporary relief. However, it noted that foreign currency shortages continue to bite, exacerbated by an overhang of domestic liquidity.
The budget deficit is projected to widen to 14.5% of GDP in 2025, driven by elevated recurrent expenditure and stalled subsidy reforms, according to Fitch. Public debt is expected to remain nearly double the median of similarly rated countries by 2026.
Fitch said it could consider an upgrade if the Maldives strengthens reserves and undertakes credible fiscal reforms. A missed payment or formal debt restructuring would likely lead to a downgrade.