Despite recent warnings of a potential sovereign default, the Maldives has reassured the public that its financial troubles are temporary. The luxury tourist destination, renowned for its upscale resorts and celebrity clientele, has ruled out seeking an International Monetary Fund (IMF) bailout. Instead, the government is actively implementing a plan that includes tax increases to meet its debt servicing obligations.
Foreign Minister Moosa Zameer, speaking in Colombo, Sri Lanka, on Friday, emphasized the country’s strong bilateral partnerships, particularly with China and India. “We have bilateral partners who are very sensitive to our needs and our situation,” Zameer stated. He added that the current financial difficulties are temporary, attributing the dip in reserves to external factors. The government’s strategy to improve liquidity includes tax reforms and a streamlining of state-owned enterprises.
China and India have emerged as the Maldives’ largest bilateral lenders, a testament to the nation’s strategic location in the Indian Ocean. President Mohamed Muizzu’s administration, which came to power a year ago, has focused on strengthening ties with China, while also mending fences with India following a period of tension. The Maldives’ foreign debt currently sits at $3.37 billion, representing approximately 45 percent of its gross domestic product. China holds about 20 percent of this debt, while India accounts for nearly 18 percent.
Zameer’s visit to Sri Lanka comes just days after Moody’s Ratings downgraded the Maldives’ credit rating to Caa2, signifying a high credit risk. Fellow ratings agency Fitch downgraded the country in June, citing dwindling foreign currency reserves as a potential financial risk. Both agencies highlighted the government’s significant debt servicing obligations, amounting to $409 million for this year, adding to the existing financial strain. Despite the challenges, the Maldives remains committed to its economic recovery and its position as a global tourist destination.
