Malé
The small island nation of the Maldives in the Indian Ocean, an Islamic banking and finance jurisdiction quite under the radar of the global Shariah-compliant finance industry, is returning to the international sukuk market amid budget troubles caused by the coronavirus pandemic.
The country’s president Ibrahim Mohamed Solih at a press conference held in the capital Malé last month announced plans to sell sukuk worth $300mn to international investors to cushion the negative impact of the Covid-19 crisis on the nation’s economy whose GDP relies to about 30% on tourism which has come to a standstill owing to global lockdowns and suspension of international flights.
Solih said that if the government could sell the full amount of sukuk as planned and the expected additional development assistance “from various countries” materialises, the negative impact of the virus on the Maldives’ economy would be “easily manageable.”
The announcement came after the government decided against taking on debt at the same amount in yen currency from the Japan Bank for International Corp, a development financing agency, in the form of so-called Samurai bonds. Against this, the international sukuk offer should broaden the range of potential investors, particularly those from the Middle East, the president said.
However, some analysts fear that the president sounded too optimistic over the new sukuk. Overall, the Maldives needs around $1.2bn to fill the hole in the state budget which has been torn open by the Covid-19 pandemic.
Making things worse, both credit rating agencies Fitch and Moody’s have revised their ratings on the Maldives following the economic downturn and have noted that it would become more “challenging” for the country to sell financial instruments such as bonds due to its rising indebtedness on the international financial markets.
Fitch Ratings in March downgraded the Maldives’ long-term local and foreign currency issuer default ratings to B from B+ and revised the outlook to negative from stable, while Moody’s in May downgraded the same rating to B3 from B2 and maintained its negative outlook.
—(Courtesy: Gulf Times)