In a major relief to the already debt-ridden country, the Maldives on Sunday signed a deal with Japan for deferment on loan repayments under the G-20 Debt Service Suspension Initiatives (DSSI).

After the pandemic hit the world, the initiative was launched by G-20 to give fiscal relief to developing countries whose economies have been hit most by the pandemic. The Maldives, a tourism-dependent economy, was among the worst-hit nations by the crisis.

The Exchange of Note was signed by the Maldives' Foreign Minister Abdullah Shahid and Japanese ambassador Keiko Yanai in the Foreign Ministry Office in the Maldives. The minister thanked Japan for the relief.

“The signing of the Exchange of Notes will contribute directly to ongoing Maldives’ economic recovery efforts and will improve debt transparency and debt management amid the present economic challenges,” the Maldives’ foreign ministry said in a statement.

Earlier in September, the government has signed a memorandum of understanding on the treatment of debt service suspensions with the representatives of various lenders countries. The government is also negotiating similar relief from Chinese commercial banks, with little success so far.

Given the precarious economic situation in the aftermath of the pandemic, Fitch Ratings earlier downgraded its rating to “CCC” from earlier “B” for the Maldives. The rating agency also projected the possibility of the country defaulting on its loan obligations. The Maldives, worst affected among the South Asian nations, saw its economy contracted by around 50 percent post-pandemic.