Maldives on Brink of Financial Collapse Amid Mounting Debt Crisis
Maldives on Brink of Financial Collapse Amid Mounting Debt Crisis The Maldives is teetering on the edge of an economic abyss due to a ballooning debt crisis that threatens its financial autonomy. As foreign exchange reserves plummet, the pressing obligation to make substantial debt repayments looms ominously.Dimitra Staikou, a human rights advocate and freelance journalist, highlighted in a Medium article that China's aggressive lending practices and trade policies have markedly worsened the island nation's financial predicament. The Maldives' total debt has soared from USD 3 billion in 2018 to USD 8.2 billion by March 2024, with projections surpassing USD 11 billion by 2029. The external debt stands at USD 3.4 billion, with China and India as the main creditors.Amid dwindling foreign exchange reserves, which briefly turned negative in August 2024, international financial entities have downgraded the country’s credit ratings. The recent Free Trade Agreement with China, which commenced in 2025, has exacerbated economic vulnerabilities, rather than mitigate them, as imports from China surged, further widening the trade gap.President Muizzu's administration has implemented measures to counteract the crisis, including raising taxes on tourism, cutting back on public spending, and attempting to secure financial assistance from international partners. Despite efforts to bridge the looming financial shortfalls, substantial debt repayments, including a USD 1 billion Sukuk due in 2026, pose an ongoing threat to the nation’s economic stability.Calls for international monetary assistance have largely gone unanswered, adding to the Maldives' risk of spiraling into a default akin to neighboring Sri Lanka. The severity of the debt crisis may jeopardize the Maldives' economic sovereignty and compound the existential climate change threat it faces as a low-lying island nation.
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