Moody’s Reaffirms Maldives’ Caa2 ‘Junk’ Rating but Upgrades Outlook to Stable as Reserves Strengthen

Malé: International credit rating agency Moody’s has affirmed the Maldives’ sovereign rating at Caa2, a speculative “junk” grade, but upgraded the country’s outlook from negative to stable, citing improvements in foreign exchange reserves and government-led financial reforms.

Moody’s had previously downgraded the Maldives from Caa1 to Caa2 in September 2024, reaffirming the lower rating in both December and May. In its latest announcement, the agency said that while the high-risk rating remains unchanged, the shift to a stable outlook signals that no further downgrade is expected in the medium term.

The upgrade reflects policy measures aimed at strengthening foreign exchange reserves, improving the government’s capacity to service debt, and safeguarding funds needed for essential imports. Despite a steep decline in reserves earlier in 2024, both the Monetary Authority of Maldives (MMA) and the Sovereign Development Fund (SDF) have substantially increased reserve buffers.

Foreign reserves climbed to USD 859 million last month—enough to cover roughly three months of imports—compared with just USD 364 million in September 2024. The SDF balance has also improved significantly, rising from USD 15 million last year to USD 126 million as of November 9, 2025.

Moody’s said these gains have strengthened the Maldives’ ability to meet external debt obligations, though it warned that the country’s fiscal position remains fragile. As a result, the sovereign rating remains at Caa2, indicating high default risk.

Under Moody’s global rating scale, AAA represents the lowest risk. Ratings below BB fall into the speculative or junk category. While the Maldives retains a speculative-grade rating, most South Asian economies are placed higher:

• India: Baa3 (investment grade)
• Bangladesh: Ba3 (speculative but stronger)
• Sri Lanka: Ca during its debt crisis

This positions the Maldives above Sri Lanka’s distressed category but significantly below India and Bangladesh, highlighting its vulnerability to external shocks and its dependence on tourism-driven foreign exchange inflows.

Moody’s said the outlook could improve further if fiscal consolidation continues and reserve buffers strengthen, helping the country better manage its rising debt burden.