Finance Minister Links Credit Rating Downgrades to Israeli Passport Ban Proposal

Maldives Finance Minister Moosa Zameer has suggested a connection between the Maldives’ recent credit rating downgrades and the government’s political actions, including discussions about a proposed ban on Israeli passports.

In August, Fitch downgraded the country’s credit rating to “CC,” citing concerns that the Maldives may struggle to repay foreign debt. The following month, Moody’s downgraded the Maldives to “Caa1,” attributing the decision to high credit risk and the country’s fragile economic situation.

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Speaking at a budget review committee meeting on Thursday, Zameer acknowledged that domestic politics play a role in the country’s credit rating, specifically referencing the political discourse surrounding the Israeli passport ban. 

“Since we began talking about banning Israeli passports, we have seen some reactions, including tweets. We know what is happening,” he said, though he did not provide further details. 

Zameer, who served as Foreign Minister when the Cabinet approved the passport ban, emphasised that the original justification for the policy was linked to the country’s reserve issues, not necessarily the impact on reserves.

Despite these comments, financial experts have pointed to rising public debt and challenges in securing external financing as the primary factors behind the downgrades. Fitch’s rating report highlighted the ongoing foreign exchange shortage, exacerbated by increased public investment and higher import costs, which have put pressure on the country’s reserves. 

“This has resulted in persistent US dollar shortages, exerting pressures on the parallel market and reserve buffers,” Fitch noted.

Moody’s downgrade to “Caa1” reflects a significant rise in default risk, with the agency warning that the Maldives’ external liquidity position could worsen without immediate financial assistance. Moody’s also highlighted the country’s substantial external debt obligations coming due within the next 12 to 18 months. The latest data shows that usable reserves stood at just USD 31.5 million at the end of October, a sum insufficient to cover one month of essential imports.

Meanwhile, the Parliamentary Committee on Security Services (241 Committee) has approved extending work on the bill to ban Israeli passports until February 2025. The delay has faced criticism from both opposition members and the public, who have expressed frustration with the slow progress of the legislation.