Fitch has downgraded Maldives' credit rating to CCC Plus.

Fitch had previously downgraded Maldives' rating to CCC during the Covid-19 Pandemic. Fitch gave Maldives a "B Minus" rating last year.

Maldives has been rated "B Minus" for three years. Fitch downgraded Maldives' credit rating after three years due to the country's deteriorating financial situation, increased foreign debt, and declining dollar reserves.

Fitch expects the current government to reduce its external debt in the medium term. However, Fitch said Maldives faces a major challenge in repaying its debt for next year and 2026.

Debt is expected to be MVR 9 billion next year and MVR 15 billion by 2026, Fitch said.

The current account deficit widened from $492 million (MVR 7.5 billion) to $748 million (MVR 12 billion), Fitch said. Maldives' foreign reserves' short-term foreign liabilities fell to $73 million (MVR 1.1 billion), Fitch said.

Fitch said Maldives is expected to seek international assistance to repay its debts due to the current financial situation. Compared to the outstanding debt, the Sovereign Development Fund (SDF) has a small amount of money available, Fitch said.

In 2027, Maldives' debt-to-GDP ratio is expected to reach 117 percent, Fitch said.