Fitch Ratings has upgraded the Maldives’ Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘CCC-’ from ‘CC’, citing a reduction in default risks following the successful repayment of the country’s USD500 million sukuk in April and an improved near-term external financing outlook. The rating action reflects growing recognition of the government’s ability to meet major external obligations while continuing to implement policy measures aimed at strengthening foreign currency inflows and improving liquidity conditions.
According to Fitch, the Maldives’ external debt servicing position has improved considerably after the settlement of the sukuk, which was the country’s single largest external debt obligation for the year. With that repayment completed, sovereign and publicly guaranteed external debt obligations are expected to decline significantly to USD535 million in the second half of 2026, compared with USD1.1 billion in the first half of the year. This easing of near-term repayment pressure has contributed to the agency’s view that default risks have moderated from previously elevated levels.
Fitch also pointed to additional financing support secured by the government as an important factor underpinning the upgrade. These include the rollover of a USD100 million private placement with the Abu Dhabi Fund until 2031, as well as a separate USD100 million financing facility from an Omani creditor aimed at supporting energy security. Such arrangements provide added breathing space for the Maldives as it navigates a challenging global economic environment while seeking to reinforce fiscal and external stability.
The ratings agency noted that the government has taken a series of steps to strengthen foreign currency inflows and improve financial resilience. Among the measures highlighted were revenue reforms and the implementation of the Foreign Currency Act, both of which form part of broader efforts to support the country’s external position. These measures are particularly important for a small island economy such as the Maldives, where economic performance is closely linked to the strength of tourism, trade flows and external financing conditions.
At the same time, Fitch maintained that the Maldives continues to face structural economic vulnerabilities that require sustained policy attention. The agency highlighted the country’s high public debt burden, wide fiscal and current account deficits, limited foreign exchange reserves and continued dependence on tourism-related earnings. It also pointed to the Maldives’ exposure to external shocks, including elevated energy prices associated with ongoing tensions in the Middle East, which can place additional pressure on import costs and the broader balance of payments.
Fitch reported that the sukuk repayment in April was financed through a combination of USD350 million from the Sovereign Development Fund and USD175 million from usable foreign exchange reserves. As a result, usable reserves declined to USD244 million at the end of April, while gross reserves fell to USD718 million from USD1.3 billion a month earlier. Although this reflects the scale of the repayment effort, the successful settlement of the sukuk has also demonstrated the government’s determination to honour its obligations and manage immediate repayment risks.
Looking ahead, Fitch projects that the Maldives’ current account deficit will widen to 17.5 percent of GDP in 2026, compared with 8.4 percent in 2025. This projected increase is attributed to higher import costs and weaker services exports amid broader global economic disruptions. The agency also expects the fiscal deficit to rise to 14.6 percent of GDP this year, significantly above the government’s target of 7.1 percent, reflecting softer tourism-related revenue, higher energy subsidy costs and increased capital expenditure. Public debt is forecast to rise further, reaching 119.2 percent of GDP in 2027.
Even with these pressures, the rating action offers an encouraging signal for the Maldives at a time when prudent economic management remains essential. The upgrade suggests that recent policy actions, financing arrangements and debt management measures are beginning to strengthen confidence in the country’s ability to navigate a complex external environment. For an economy that plays a prominent role in the global tourism market and continues to invest in long-term resilience, the improved rating may also support broader perceptions of stability among international partners and investors.
Responding to the rating action, the Ministry of Finance and Public Enterprises stated that the upgrade reflects growing confidence in the Maldives’ economic management despite the challenges posed by the international environment. The ministry acknowledged that the ongoing conflict in the Middle East has created economic headwinds, but said the Maldives is now better positioned to withstand external pressures due to recent fiscal and monetary reforms and an improved liquidity outlook. It also said the government has taken steps to protect economic activity, maintain spending within approved budget limits and strengthen economic infrastructure in support of long-term growth, resilience and sustainability.
Fitch further noted that the Maldives remains reliant on support from bilateral and multilateral partners, as international market borrowing continues to be prohibitively expensive. The agency added that any future support from the International Monetary Fund would likely depend on credible fiscal consolidation measures and debt management reforms. Nevertheless, Fitch identified several factors that could support future upgrades, including stronger external reserves, sustained access to foreign financing and meaningful progress in reducing public debt through effective fiscal consolidation.
While Fitch does not assign outlooks to sovereign ratings at ‘CCC+’ or below, the latest upgrade marks a positive development for the Maldives as it works to reinforce financial stability and sustain economic confidence. The agency maintained that, although credit challenges remain, the easing of default risks and the improvement in near-term financing conditions represent an important step forward for the country’s economic outlook.
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