Global credit rating agency Fitch Ratings has affirmed Maldives' long-term foreign-currency issuer default rating (IDR) at B+ with a stable outlook.
Maldives was first assigned the rating of B+ with a stable outlook by Fitch – one of the top three credit rating agencies in the world - in 2017. It affirmed the rating following an assessment of Maldives in April.
Investors use sovereign credit ratings as a way to assess the riskiness of a country's bonds.
Sovereign credit risk, which is reflected in sovereign credit ratings, represents the likelihood that a government might be unable—or unwilling—to meet its debt obligations in the future.
Fitch, in a press release announcing the affirmation of the B+ rating to Maldives on May 8, said that the rating balanced the Maldives' strong GDP growth, high government revenue generated by a prosperous tourism sector and some favorable structural indicators, such as per capita GDP, against a high government debt burden and low foreign-reserve buffers.
“The Maldives' strong GDP growth outlook is underpinned by a continued rise in the number of tourists, the construction of new resorts, and investment in some large public-sector infrastructure and housing projects,” says Fitch.
The credit rating agency says it expects GDP growth to remain high at 6.5 percent in 2019 and 6 percent in 2020.
It also took note of the development of an additional runway and new passenger terminal at Velana International Airport, which it says will allow for a significant increase in number of tourist arrivals in the coming years.
It, at the same time, cautioned that the strong dependence on tourism leaves Maldives “vulnerable to shocks that could undermine prospects for the industry.”
Fitch also observed a “significant” ease in political tensions in Maldives since the presidential election in September, 2018; and an increase in transparency.
“Enhanced transparency over the past year regarding the government’s liabilities strengthens policy credibility and is evident from a number of new publications on the Ministry of Finance’s website, particularly on its debt and guarantees,” says Fitch.
Ministry of Finance of Maldives has hailed the affirmation of the Fitch rating as an indication of increasing confidence in the current administration’s policies.