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(Bloomberg) -- Fitch Ratings downgraded the island nation of Maldives on Thursday, citing an increased risk of default, even as bond investors continued to dump the country’s debt that’s already totted up the worst monthly performance in emerging markets.

The security due 2026 dropped to 70.24 cents on the dollar Thursday, a record low. The sukuk has posted double-digit losses in August, trailing all its peers on the Bloomberg EM Sovereign Total Return Index. The country’s conventional dollar bonds also fell.

The ratings company downgraded the country standing in the second such cut since June. It said “intensified pressures from the country’s recently deteriorating external financing and liquidity metrics have made a default event more likely within the rating horizon.” Fitch also saw greater uncertainty over the government’s plan to access the market and partly refinance the $500 million sukuk in 2025.

The notes came under renewed pressure this week after Bank of Maldives, the country’s biggest commercial bank, introduced new limits on spending in foreign currency for its customers on Sunday. The decision was reversed — spooking some investors.

“Changes to card limits for foreign transactions announced on 25th August 2024 has been reversed based on instruction from our regulator, the Maldives Monetary Authority,” said the bank in a short written statement.

Bond investors were alarmed by conflicting reports regarding foreign-currency restrictions even as they worried about the country’s fiscal deficit, debt and upcoming financing needs, said Hasnain Malik, a Dubai-based strategist at Tellimer.

“The episode highlights that neither is the Muizzu-led government implementing much needed fiscal consolidation nor is it enjoying harmonious relations with all of its own business community,” he said.

Maldives’ ruling People’s National Congress party won an absolute majority in parliament in elections held April, giving President Mohamed Muizzu’s pro-China policies a boost. Muizzu won the presidential vote last year on a campaign to reduce India’s presence in the country.

The Maldives’ foreign reserves declined to $395 million as of June 24 from about $700 million a year ago, according to official data. The International Monetary Fund warned in May that without significant policy changes, the country will face a high risk of debt distress.

(Updates with prices and further comments from Fitch in fourth paragraph.)