Global credit rating agency Moody’s has reaffirmed the Maldives’ credit rating at Caa2, emphasizing the impact of ongoing fiscal and foreign exchange reforms aimed at stabilizing the economy.

In its statement issued today, Moody’s noted significant strides in strengthening the country’s financial position, including measures by the Maldives Monetary Authority (MMA) and recent tax reforms.

Moody’s highlighted that the introduction of new foreign exchange regulations and the government’s tax adjustments are likely to boost foreign exchange reserves.

The agency also acknowledged recent successes in securing foreign currency financing, including a currency swap agreement with India worth USD 400 million and INR 30 billion, expected to be operational by September 2024.

The Maldives’ foreign exchange reserves are further anticipated to increase as new tax measures take effect.

However, Moody’s cautioned that the nation faces considerable foreign debt obligations over the next 12 to 18 months, with challenges in accessing foreign currency persisting.

The agency emphasized that maintaining or improving the current credit rating will depend on the successful implementation of fiscal reforms outlined in the 2025 Budget and the ability to secure additional foreign currency financing.

Forex Regulation Gains Momentum Moody’s statement follows a series of fiscal measures introduced after the Maldives’ long-term credit rating was downgraded from Caa1 to Caa2 in September 2024.

Among these measures was the Maldives Monetary Authority’s (MMA) implementation of the Foreign Currency Regulation announced in October 2024.

The regulation requires tourism establishments to deposit earnings into domestic banks, improving dollar liquidity for imports, debt repayments, and other transactions.

Compliance with the regulation has been robust, with 173 of 174 resorts registering under the new framework according to MMA.

Additionally, tourist establishments are now mandated to convert specified amounts of foreign currency each month.

For example, Category A establishments must exchange USD 500 per tourist arrival monthly, while Category B establishments are required to convert USD 25 per tourist.

Exceptions to these rules are granted on a case-by-case basis by the MMA.

These efforts represent a critical step toward bolstering the Maldives’ foreign exchange reserves and ensuring greater stability within the economy.