Fitch Ratings has downgraded the Maldives' Long-Term Foreign-Currency Issuer Default Rating (IDR) from ‘CCC+’ to ‘CC,’ prompting a sharp response from the Maldivian Democratic Party (MDP). The MDP has condemned the current administration’s policies as the primary cause of this financial deterioration.
In a statement released on Thursday, the MDP expressed deep concern over the downgrade, which reflects heightened financial risk and worsening conditions under the current government. The party highlighted several critical factors contributing to the downgrade:
1.Government Policy Impact on Tourism: The MDP criticized the administration’s foreign policy, particularly tensions with India, which have negatively affected the tourism sector—a key economic pillar. Despite a 15% increase in USD revenue from tourism, declining foreign exchange reserves indicate deeper structural issues.
2. Excessive and Unplanned Spending: The party pointed to significant unplanned expenditures, such as USD 37 million for military drones and a USD 50 million Treasury bill repayment, as detrimental to the country's fiscal health. These spending decisions have exacerbated the fiscal deficit and external imbalances.
3. Delayed Fiscal Reforms and Inaction: The MDP accused the current administration of failing to implement necessary fiscal reforms and secure stable external financing, raising the risk of further credit downgrades, higher borrowing costs, and diminished investor confidence.
The MDP called for immediate government action to address these issues, including reducing non-essential public spending, accelerating fiscal reforms, and seeking support from multilateral partners. The party warned that failure to act could lead to deeper economic crises and further downgrades.
The MDP emphasized that improving the credit rating requires securing external financing and advancing fiscal reforms. They expressed readiness to support efforts to restore fiscal health and stability, urging all stakeholders to collaborate for the nation's future well-being.
The Fitch downgrade reflects serious challenges in the Maldives’ financial management and underscores the urgency of addressing these economic concerns.
In a statement released on Thursday, the MDP expressed deep concern over the downgrade, which reflects heightened financial risk and worsening conditions under the current government. The party highlighted several critical factors contributing to the downgrade:
1.Government Policy Impact on Tourism: The MDP criticized the administration’s foreign policy, particularly tensions with India, which have negatively affected the tourism sector—a key economic pillar. Despite a 15% increase in USD revenue from tourism, declining foreign exchange reserves indicate deeper structural issues.
2. Excessive and Unplanned Spending: The party pointed to significant unplanned expenditures, such as USD 37 million for military drones and a USD 50 million Treasury bill repayment, as detrimental to the country's fiscal health. These spending decisions have exacerbated the fiscal deficit and external imbalances.
3. Delayed Fiscal Reforms and Inaction: The MDP accused the current administration of failing to implement necessary fiscal reforms and secure stable external financing, raising the risk of further credit downgrades, higher borrowing costs, and diminished investor confidence.
The MDP called for immediate government action to address these issues, including reducing non-essential public spending, accelerating fiscal reforms, and seeking support from multilateral partners. The party warned that failure to act could lead to deeper economic crises and further downgrades.
The MDP emphasized that improving the credit rating requires securing external financing and advancing fiscal reforms. They expressed readiness to support efforts to restore fiscal health and stability, urging all stakeholders to collaborate for the nation's future well-being.
The Fitch downgrade reflects serious challenges in the Maldives’ financial management and underscores the urgency of addressing these economic concerns.
