Foreign countries unwilling to provide crucial financial assistance to Maldives

According to Economic Times, which reports on economic news, foreign countries and financial institutions have not given a hopeful response to providing aid to President Dr. Mohamed Muizzu's government, which is in a fragile economic situation presently.

Economic Times states that although the Maldives has sought financial assistance from multiple financial institutions, these efforts have not been successful so far. This includes the government's request for USD 300 million from each Gulf Cooperation Council (GCC) country, to which the GCC countries have not given a hopeful response.

In addition to this, the president had also requested USD 200 million in budget support from China, as well as debt refinancing and currency exchange, but China has not given a hopeful response so far either. However, with India's USD 750 million currency swap, the Maldives has received some temporary relief, providing an opportunity to maintain import expenses and government expenditures for the time being, as reported.

According to the Economic Times report, the Maldives' external debt stands at USD 3.4 billion, with a large portion owed to China and India. The biggest concern is the USD 600 million in external debt due in 2025 and USD one billion in debt service due in 2026.

The Muizzu administration has stated that it will take measures such as increasing tourist taxes, reducing salaries, and selling shares of state-owned businesses. However, apart from increasing taxes, no other reform measures have been implemented so far.

Further, the Maldives has sent ministers to Gulf countries and sought urgent assistance from friendly nations. However, these countries have not yet given a hopeful response to the Maldives' requests, according to the Economic Times report.

The Maldives has also requested USD 200 million in budget support from the China Development Bank, as well as refinancing assistance for debt service payments and currency exchange with China. However, China has not responded to this request from the Maldives so far.

Further efforts to seek budgetary assistance from Bangladesh and Sri Lanka have not yielded positive results, while Sharjah Islamic Bank has expressed concerns about the planned USD 200 million sukuk bond issuance by the Maldives.

The Economic Times stressed that finding resources to repay the USD one billion sukuk due in 2026 remains a significant challenge for the government.

While an increase in tourist numbers and the USD 750 million currency swap with India may provide short-term relief, the Economic Times highlighted that these measures are unlikely to fully cover the upcoming mandatory debt payments.

The Maldives' debt has risen from USD three billion in 2018 to USD 8.2 billion by the end of March 2024, with projections indicating it could exceed USD 11 billion by 2029.