Finance Minister Moosa Zameer has said there is a connection between the downgrading of Maldives' credit rating and the proposed ban on Israeli passports.
Fitch downgraded the Maldives' rating to "CC" in August with the assumption that the country will not be able to repay foreign debt while Moody's downgraded Maldives' credit rating to Caa1 in September because of high credit risk.
During a meeting of the budget review committee on Thursday, Zameer said there was a link between the credit rating downgrade and the government's political decisions.
"[Credit rating] is linked to Maldives' domestic politics. For example, since we began talking about banning Israeli passports, we have seen some people tweeting. We know what is happening," he said.
However, Zameer, who was the Foreign Minister when the cabinet decided to ban Israeli passports, did not elaborate.
"The justification at the time was our reserve issue. Not necessarily because there has been a hit on our reserve or anything," Zameer said.
Despite the Finance Minister’s comments, rising public debt and difficulties in securing external financing were the main reasons cited by Fitch for the rating downgrade.
Fitch further noted that the foreign exchange shortage will persist in the coming days because of an increase in public investment and expenditure on imports.
"This has resulted in persistent US dollar shortages, exerting pressures on the parallel market and reserve buffers, since its import cover has traditionally been much lower than in 'B'/'C'/'D' peers," Fitch said in its rating report.
Moody's downgraded Maldives to Caa1 because of high credit risk. This means Moody's rating is now at "non-investment" grade.
"The decision to downgrade is driven by our assessment that default risks have risen materially," Moody's said and placed the Maldives "on review" for a follow-up downgrade.
Moody's added that the country's "fragile external liquidity position will likely worsen further without near term financing" and that it has "significant external debt obligations coming due within the next 12-18 months."
According to the latest figures, usable reserves stood at USD 31.5 million at the end of October which is not enough for the import of essential commodities for one month.
Meanwhile, the Parliament Committee on Security Services (241 Committee) has approved extending work on the bill to ban Israeli passports until February next year.
The opposition and the public have been criticizing the government and the government's supermajority in Parliament for the delay in the bill.
