Fitch has increased the credit rating for the Maldives to a B- since the country's tourism industry has recovered faster than expected after COVID-19.

One of the largest international credit rating company, Fitch, last updated the rating for the Maldives in November 2020 downgrading from B to CCC claiming that the national debt had increased due to COVID.

Rating issued by Fitch last night said that based on the number of tourist visits to the Maldives this year so far, 70 percent of the industry has recovered and so it would have recovered 80 percent by 2022 and 100 percent by the end of 2023.

The report from Fitch said that the rise in the Maldives' government debt/GDP ratio to 115.6 percent in 2020 from 62.9 percent in 2019 was among the largest increases from the pandemic globally.

"We forecast government debt to fall to 107.6 percent of GDP in 2021, as GDP recovers from the pandemic shock, but remain broadly stable in the following few years, as growth rates will slow and primary deficits stay large. This is well above the 'B' category median of 67.7 percent of GDP in 2021. In addition, the Maldivian government's guaranteed debt amounted to 34% of GDP in 2020, mostly related to housing projects, and up from 15.8 percent of GDP in December 2019, partially from lower GDP." Fitch report said.

They also said that with yields on the USD 500 million sukuk at around 10 percent, we expect the authorities will remain dependent on bilateral and multilateral sources of financing. The government has USD 244 million in external debt service obligations falling due in 2022, against our forecast for foreign-exchange reserves of USD745 million. Some of the USD 205 million in government-guaranteed debt maturing in 2022 could also crystallise on the sovereign balance sheet.

"The government's current expenditure is subject to risks from high oil import prices and spending pressures from the next presidential elections in 2023. The government aims to reduce its deposit overdrafts from the Maldives Monetary Authority (MMA), a monetary financing facility allowing the government access to MVR4.4 billion until April 2022. The MMA had around MVR1.5 billion in loans and advances to the government outstanding in September 2021, down from MVR4 billion (5.3% of GDP) in August, in addition to MVR13.6 billion in treasury bonds. Inflationary pressures from monetary financing and bond purchases have been limited so far, however, given the currency peg and fuel subsidies." The report from Fitch said.