Fitch Ratings, the reputed US credit rating agency, on Thursday, downgraded the Maldives’ credit rating to CCC from its earlier B minus. This led the finance ministry to issue a strong opposition Friday on the agency’s projections of the country.

The agency also warned the country of defaulting on its loan repayments’ obligations.

The government debt is likely to jump to 110.7 percent of GDP, which was 62.6 percent in 2019. The projections say that the country’s economy will be contracted by 30 percent, crossing the downfall suffered by the archipelago during the Tsunami in 2004 and the global financial crisis in 2008, but expected recovery of 16 percent in 2021, and 20 percent in 2022.

Owing to delayed recovery in the tourism sector, the report said the country’s economic outlook “deteriorated dramatically” in recent months and made the country more dependent on “bilateral and multilateral financing.”

Even in 2021, the projections don’t see a full recovery of the tourism sector and the country would see a fiscal deficit at 18.8 percent in 2021.

A sharp increase in the debt’s burden, the raging coronavirus, and continued debt-funded infrastructure projects are the key reasons that led to the downgrading, Fitch Ratings said in its report.

“In recent months, the authorities have succeeded in securing new external financing, but foreign-currency buffers remain low and it will be difficult for the Maldives to generate foreign-exchange inflows without normalization of tourist activity,” reads the report.

In a statement, the finance ministry expressed its dissatisfaction with the rating agency’s decision.

It said that it did not accept the lowered rating and the country’s economy is actually improving, the Sun Online reported. The ministry also stressed that the Maldivian debt had never been defloated and that the government would maintain it this way. Fitch Ratings had said that the risks of the Maldives defaulting on the loan repayments were very real and that the economy was suffering beyond expectations.

The ministry also said that repayments of loans obtained by the government and state-guaranteed loans were being made on time. 

Responding to tourism projection, the ministry said, the tourist arrival in the Maldives on the rise ever since the country reopened its border in July. In July, the tourist arrivals were 2,000 but went up to 21,000 by October.

More than 100 tourists resorts are operational, and the government would keep the tourism promotional budget higher next year, the Sun Online reported.