The International Monetary Fund has warned Maldives of great “debt distress” if it doesn’t not review its financial policies soon. After a series of increased borrowings from China, the IMF has project Maldives to be at high risk for “external and overall debt distress”.
The International Monetary Fund has not given details of Maldives’ foreign debt but has called for an “urgent policy adjustment”.
Abdulla Yameen, who was the President of Maldives from 2013 to 2018 had borrowed heavily from China for construction projects. With this borrowing, Yameen, who is also Muizzu’s mentor, Maldives owes 42 percent of its foreign debt to China. As per the World Bank in 2021, this 42 percent of debt was added to the $3 billion male already owes Beijing.
With Mohamed Muizzu taking over as President, Beijing has pledged more funding to Maldives. However, the IMF has warned the island nation of severe debt distress.
Upon reviewing the country’s economy, the IMF has stated that “without significant policy changes, the overall fiscal deficits and public debt are projected to stay elevated. The Maldives remains at high risk of external and overall debt distress”.
This warning from the IMF also comes amid the country’s increased “pro-China” stance. Shifting its allegiance with India to China, President Muizzu made his first visit as President to Beijing last month.
During this visit, Muizzu met with President Xi Jinping as both leaders vowed to boost their ties, especially in sectors such as tourism.
Chinese tourists have already taken the top spot of international visitors in Maldives. India, which heled the top spot in 2023, dropped to the fifth spot amid the diplomatic standoff between Male and New Delhi.