Maldives seeks aid amid severe debt crisis, $1 billion payment due in 2026

Maldives struggles with soaring debt as $1 billion repayment looms in 2026, seeking urgent financial aid from China, Gulf nations, and regional partners amid crisis

Maldives is grappling with a severe debt crisis, raising concerns of a potential default similar to Sri Lanka’s financial collapse. Despite implementing austerity measures, the island nation is struggling to manage its fast-depleting foreign exchange reserves, with major debt repayments due in 2025 and 2026.

 

According to a report by The Economic Times, Maldives’ external debt has surged to $3.4 billion, primarily owed to China and India. The immediate challenge lies in repaying $600 million in 2025 and a staggering $1 billion in 2026.

 

To tackle the crisis, President Mohamed Muizzu’s government has introduced tax hikes on tourists, salary cuts for officials, and plans to sell stakes in state-owned enterprises. Additionally, Maldives has sought financial assistance from Gulf nations, but these appeals have yet to receive a positive response, the report said.

 

 

China and regional support

 

Maldives has also requested $200 million in budget support from the China Development Bank, a currency swap arrangement with China, and debt refinancing options to ease upcoming payments. However, Beijing has remained silent on these appeals.

 

Efforts to secure financial aid from Bangladesh and Sri Lanka have not yielded results either. Meanwhile, the Sharjah Islamic Bank has expressed concerns about facilitating a $200 million Sukuk bond issuance, further complicating Maldives’ ability to meet the $1 billion Sukuk repayment due in 2026.

 

Tourism and India’s currency swap

 

While higher tourist arrivals and a $750 million currency swap from India may provide short-term relief, they are unlikely to fully offset the nation’s mounting debt obligations. The structural vulnerabilities of Maldives — a small production base, heavy reliance on imports, low economic diversification, and external shocks like Covid-19 and rising oil prices — continue to add pressure on its fragile economy.

 

Debt tripled since 2018, projections worsen

 

Despite securing international loans and grants over the years, Maldives’ debt has ballooned from $3 billion in 2018 to $8.2 billion as of March 2024. Projections indicate that it could surpass $11 billion by 2029, intensifying fears of a financial collapse unless urgent corrective measures are taken.