The Indian Ocean Island of Maldives hopes to use its upcoming sovereign rating to help local firms raise cash in international markets, the atoll's finance minister said.

A sovereign or country rating serves as an indication of a nation's ability to repay its debt and is a key requirement to raise money from the international capital markets.

"We have appointed Standard & Poor's rate our country's creditworthiness," Finance Minister Gasim Ibrahim said. "The government has no immediate plans to use the rating and raise money overseas. But the thinking behind a rating is to set an indicative benchmark for Maldivian companies who plan to raise money abroad."

The Maldives recently announced plans seeking international investors to build 10 regional airports to support 35 new island resorts that are being developed. The new resorts will help raise the local hotel industry's bed capacity to 23,000 within the next three years from 20,000 now.

Investors are expected to inject 120 million dollars within the next 10 years, some into exclusive villas that charge in excess of 30,000 dollars a night, pampering to the rich and famous. Analysts expect a sovereign rating will help some investors to raise capital in the overseas market.

If all goes through, Maldives plans to announce the sovereign rating before the year ends. "Standard & Poor's have done some preliminary work now, hopefull we can go public with the results by the end of this year," Gasim said.

Maldives economy of just under a billion dollars, is not known to have tapped the capital markets to raise funds. Most of the South Asian coral island's financing has come from bi-lateral or multi-lateral debt.

A few years back, the government tapped international banking giant HSBC for a 10 million dollar project loan to partially fund the upcoming second international airport in the Gan Islands.

The tiny island nation has also never defaulted on a payment, which analysts said, puts its creditworthiness on par with neighbouring countries like India and Sri Lanka.

About 700 kilometres (435 miles) southwest of Sri Lanka, Maldives is a string of 1,192 coral islands scattered across the equator. Some 199 are inhabited with 87 islands developed as tourist resorts.

South Asia's most expensive holiday destination, Maldives economy is forecast to grow 5.5 percent in 2007 from a staggering 19.0 percent in 2006, the Washington-based International Monetary Fund said in August as a recovery spending following the December 2004 tsunami comes to an end this year.

The economy had contracted by 4.5 percent in 2005 from the impact of the December 2004 tsunami on the sea-level archipelago, the fund said.

"Growth in (the) Maldives has rebounded strongly from the devastating Indian Ocean tsunami of 2004, underpinned by booming tourism and construction sectors," the fund said.

Tourism, which accounts for about a third of economic growth, is forecast to reach 600,000 vistors this year, close to pre-tsunami levels with earnings set to leap 51 percent to 434 million dollars. The Male-based government is also fast-tracking leisure-related development in a bid to accomodate a million tourists by 2010.

The low-lying atolls have a population of 369,000 Sunni Muslims and the region's highest per capita income of 2,674 dollars.

Courtesy: Lanka Business Online 

Published in : The News, National News

Keywords : News, National News, Maldives goes for a sovereign rating

Users' Comments (0)

Add your comment