Maldives warned over looming Chinese debt
Agence France-Press
The International Monetary Fund (IMF) has warned the Maldives over looming “debt distress” as the Indian Ocean nation looks to borrow more from the People’s Republic of China (PRC).
Since winning office in 2023, President Mohamed Muizzu has reoriented the atoll nation — known for its beach resorts and celebrity vacationers — away from traditional benefactor India and toward Beijing.
His party won April 2024 parliamentary elections after promising to build thousands of apartments, reclaim land for urban development and upgrade airports, all with funding from the PRC, the Maldives’ main creditor.
Without naming the PRC, the IMF said the Maldives remained “at high risk of external and overall debt distress” without “significant policy changes.”
“Uncertainty surrounding the outlook is high and risks are tilted to the downside, including from delayed fiscal consolidation and weaker growth in key sources markets for tourism,” the IMF stated.
It urged the Maldives to raise revenue, cut spending and reduce external borrowing to avoid an economic crisis.
The nation of 1,192 tiny coral islets scattered across 800 kilometers near the equator straddles key east-west international shipping routes. Tourism is a crucial source of foreign exchange.
The Maldives’ foreign debt exceeded $4 billion in 2023, official data shows, representing about 118% of the nation’s gross domestic product and up nearly $250 million from 2022.
As of June 2023, the Export-Import Bank of China owned 25.2% of the Maldives’ external debt and was the country’s biggest single lender, according to the Maldives Finance Ministry.
Neighboring Sri Lanka defaulted on its foreign debt in 2022 after an economic crisis brought months of food and fuel shortages and toppled the government.
More than half of Sri Lanka’s bilateral debt is owed to the PRC and the island nation is seeking to restructure its borrowings with IMF assistance.
Unable to service a huge Chinese loan to build a port in the south, Sri Lanka allowed a Chinese state-run company to take over the facility on a 99-year lease in 2017. The deal raised fears about Beijing’s use of “debt traps” in exerting its influence abroad, including in the Indian Ocean region.
