Moody’s affirms Maldives’ ‘junk’ Caa2 rating but upgrades outlook to stable amid reserve gains

International credit rating agency Moody’s has maintained Maldives’ sovereign credit rating at Caa2, while upgrading the outlook from negative to stable.  

Moody’s had downgraded Maldives’ debt rating from Caa1 to Caa2 in September, and reaffirmed the Caa2 rating in December and May. The agency announced today that while the rating remains unchanged, the outlook has improved.  

Moody’s outlook categories are Positive, Negative, Stable, and Developing. A negative outlook signals a likely downgrade, while a stable outlook indicates that no rating change is expected in the medium term.  

According to Moody’s, the shift reflects government reforms aimed at strengthening foreign exchange reserves and ensuring funds for debt servicing and imports. Despite a decline in reserves earlier in 2024, both the Monetary Authority of Maldives (MMA) and the Sovereign Development Fund (SDF) have since bolstered reserves.  

• Foreign exchange reserves stood at USD 859 million last month, covering about three months of imports, up from USD 364 million in September 2024.  

• The SDF balance rose from USD 15 million last year to USD 126 million as of November 9, 2025.  

Moody’s noted that these improvements place Maldives in a stronger position to meet debt obligations, though the fiscal situation remains fragile. As a result, the rating stays at Caa2, which is considered a junk grade, reflecting high default risk.  

Moody’s global rating scale ranges from AAA (lowest risk) down through AA, Baa, BB, and below. Ratings under BB are classified as speculative or “junk,” highlighting elevated risks for investors.  

While Maldives remains at Caa2, a speculative-grade rating, most South Asian peers are rated higher. For example, India holds Baa3 (investment grade), Bangladesh is at Ba3 (speculative but stronger than Maldives), and Sri Lanka was downgraded to Ca during its debt crisis. This places Maldives above Sri Lanka’s distressed rating but well below India and Bangladesh, underscoring the country’s vulnerability to external shocks and reliance on tourism-driven foreign exchange inflows.