Maldives at high risk of foreign debt distress, warns IMF amid Male’s growing ties with China

The International Monetary Fund (IMF) on Wednesday warned that Maldives is at a "high risk of debt distress" amid Male borrowing heavily from China and shifting allegience from

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February 7, 2024 2:36 pm

In a landmark State Visit to China, President Dr Mohamed Muizzu ushered in a new chapter in economic collaboration between the two nations. The visit, spanning from January 8 to 12, 2024, signified a deepening of ties and commitment to mutual prosperity.

NEW DELHI: The International Monetary Fund (IMF) on Wednesday warned that Maldives is at a “high risk of debt distress” amid Male borrowing heavily from China and shifting allegience from India under President Mohamed Muizzu.

China has promised more funding to Maldives ever since pro-Beijing Muizzu assumed power last year.

Muizzu, who defeated pro-India President Ibrahim Mohamed Solih, made his first international trip to Beijing after assuming office.

He thanked China after his visit for its “selfless assistance” for development funds.

Though the IMF did not offer details of the Maldives’ foreign debt, it said there was a need for “urgent policy adjustment”.

“Without significant policy changes, the overall fiscal deficits and public debt are projected to stay elevated,” the IMF said after a review of the country’s economy.

“The Maldives remains at high risk of external and overall debt distress”.

Notably, the IMF warning comes at a time when several South Asian countries are already reeling from the consequences of borrowing heavily from China.

Pakistan and Sri Lanka have been saddled with billions of dollars of debt, which has exacerbated the economic crises in both the countries.

According to observers, both countries have received billions of dollars from Beijing as part of President Xi Jinping’s ambitious Belt and Road Initiative (BRI).

Maldives was another country that was part of China’s expansion plans, especially in the strategic Indo-Pacific region.

Global east-west shipping lanes pass through the nation’s chain of 1,192 tiny coral islands, stretching around 800 kilometres (500 miles) across the equator.

Muizzu’s mentor, former president Abdulla Yameen, who ruled for five years until 2018, had also borrowed heavily from Beijing for construction projects.

The borrowing left Maldives owing a whopping 42 percent of its more than $3 billion foreign debt to China in 2021, according to the World Bank, citing the Maldives’ finance ministry.