The Maldives has achieved a significant milestone in its efforts to strengthen financial stability, with Moody’s Ratings reportedly upgrading the country’s sovereign credit rating from Caa2 to Caa1 with a stable outlook, following a series of major debt repayments under President Dr Mohamed Muizzu’s administration.
The Ministry of Finance and Public Enterprises described the development as an important indication of improving confidence in the country’s financial position, following a challenging period marked by substantial external debt obligations, pressure on foreign currency reserves and uncertainty in the global economy.
According to the ministry, the rating upgrade reflects a reduction in the risk of sovereign default, supported by the government’s efforts to meet major financial commitments and strengthen the country’s financial safeguards.
The development follows one of the most demanding periods for the Maldives’ public finances, with the government required to settle substantial external obligations during 2026.
Among the most significant achievements highlighted by the Finance Ministry was the settlement of a USD 500 million sovereign Sukuk in April, a major repayment that had previously raised concerns about the country’s ability to meet its debt obligations.
The government also secured a USD 400 million currency swap facility to support foreign exchange liquidity, providing an additional financial safeguard during a period of heightened repayment pressures.
Further measures included the settlement of USD 100 million in Treasury bills during May and September, alongside an agreement to extend the maturity of a USD 100 million Eurobond until 2031.
The extension has helped ease immediate repayment pressures by providing additional time to meet the obligation.
The Finance Ministry said the successful handling of these financial commitments was central to the improvement in the Maldives’ sovereign credit assessment.
The country’s debt repayment challenges had previously contributed to concerns among international credit rating agencies.
In September 2024, Moody’s downgraded the Maldives to Caa2 amid pressure on foreign currency reserves and concerns over upcoming external debt repayments.
The latest reported upgrade represents an improvement from that position, although the Caa1 rating remains within the speculative-grade category, indicating that substantial credit risks continue to exist.
Beyond meeting immediate financial obligations, the Muizzu administration has introduced measures intended to improve foreign currency availability and strengthen the country’s ability to manage future debt repayments.
Foreign exchange policies introduced in 2024 and expanded in 2026 are expected to increase the flow of foreign currency into the formal financial system.
These measures are also intended to support the accumulation of gross official reserves and strengthen the Sovereign Development Fund (SDF), which plays an important role in managing the country’s debt obligations.
For an economy heavily dependent on imports, maintaining sufficient foreign currency reserves is essential to ensuring the continued availability of goods, supporting international payments and meeting external financial commitments.
The Finance Ministry identified improvements in foreign exchange reserves and the strengthening of SDF safeguards as important factors contributing to the more favourable assessment of the Maldives’ financial position.
The government has also continued securing concessional financing from international development partners to support priority projects while managing its broader borrowing requirements.
These include USD 40 million from the World Bank, USD 50 million from the Asian Development Bank and USD 40 million from the OPEC Fund for International Development.
Together, the financing arrangements amount to USD 130 million, providing additional resources for development initiatives under more favourable financing terms than those typically available through commercial borrowing.
Another indicator highlighted by the Finance Ministry is the reduction in public debt relative to the size of the national economy.
According to ministry figures, public debt stood at 129.2 percent of gross domestic product at the end of 2025 before declining to 122.6 percent by July 2026.
Although the country’s debt burden remains substantial, the reported reduction represents progress towards the government’s objective of placing public finances on a more sustainable footing.
The developments have taken place against a difficult international economic backdrop.
Rising energy prices associated with conflicts in the Middle East, fluctuations in global financial markets and the Maldives’ dependence on imported goods continue to present challenges for economic management.
Despite these pressures, the government has reiterated its commitment to maintaining essential public services, supporting economic activity and strengthening fiscal discipline.
The Finance Ministry said efforts to improve financial safeguards and meet repayment obligations would remain central to the administration’s economic policies.
The government views the reported Moody’s upgrade as recognition of the progress made in managing debt obligations and reducing immediate financial vulnerabilities.
At the same time, maintaining the improvement will require continued efforts to strengthen reserves, control expenditure and manage future borrowing commitments.
The Maldives remains exposed to external economic shocks, making prudent fiscal management and adequate financial buffers important to sustaining longer-term stability.
Nevertheless, the reported improvement in the country’s sovereign credit rating marks an encouraging development for the Muizzu administration as it seeks to restore confidence in public finances and establish a stronger foundation for economic growth.
With major repayment obligations addressed, foreign currency safeguards strengthened and debt indicators showing improvement, the government is positioning these developments as important steps towards securing the Maldives’ long-term financial stability.
