Edited by Deepali Verma
Maldives President Mohamed Muizzu said he is unable to launch any new development projects owing to the debt situation in the country. The President said he had no intention to mislead the public regarding the economic situation that his administration “inherited”, as per the Male-based news outlet Adhadhu.
Muizzu, under pressure from the people who had been complaining about stalled projects in the archipelago nation, had to disclose the real state of the economy. “The coming two months will be the most difficult and this is the most critical time,” he remarked on his visit to one of the country’s islands, Guraidhoo. “It will gradually get easier after July but we’re starting to do the work necessary now to earn income.”
The Maldivian President, under whose leadership the Male’s relationship with New Delhi has taken a hit, said that it is not just the government debts but the borrowings of the state-owned enterprises that are high as well. “I am trying to bring sustainable development in its true meaning and it won’t be something that will produce results if I set down foundation stones like it was in the past without considering the reality as there is an election ahead,” he said.
Muizzu, assuming power in November 2023, has tilted towards China, and is counted among the major lenders to Male. He talked of facing difficulties in carrying out big development projects while they are “trying to manage debt”. “I want to carry out additional developmental projects. But this is the reason why we cannot start all the stalled projects and launch new projects in all the islands at once,” he said.
The Maldivian President said that he cannot assure the people that he will fulfill everyone’s requests at one go. “The economy we inherited is in a bad state. We need to put in place measures because of the level of debt,” he was quoted as saying by Adhadhu. “We are undergoing a lot of hard work to fix this. Both the IMF as well as the World Bank accept the economic manifesto I presented during my campaign.”
The World Bank and the IMF, as per Muizzu, said that the solution to improve the country’s economy was to implement the government’s policies. “We will tell you what can be done and what will be done and while some things might take longer, we will be honest and true to our word,” he said.
Last month, when Muizzu visited China, he was warned by people about Beijing’s debt-trap policy. Male has taken massive loans from China. The China Development Bank, the Industrial as well as the Commercial Bank of China, and the Export-Import Bank of China hold over 60 per cent of Maldives’ sovereign debt, as per the report by the Observer Research Foundation (ORF).
The World Bank, before Muizzu’s takeover as President, said increasing external and fiscal vulnerabilities were posing threat to the Maldivian economy, especially if Male continues to borrow at high costs. It revealed that by 2026, the $5.4 billion Maldivian economy will have to service a record $1.07 billion in external debt.
Asia Nikkei reports say that the bank’s latest assessment compounded the existing concerns about Male’s obligation to spend an average of $300 million a year to service foreign debt from 2022 to 2024. “Despite having expectations of decreasing deficits, Maldives’ complete debt is set to remain high at over 115% of GDP,” it has said.
Faris H Hadad-Zervos, World Bank Country Director for Maldives, said that the island country is looking at a strong growth of 6.5 per cent this year. “However, to make sure a more resilient economy as we move forward, and to build on the recent reforms, prudent debt management combined with a fiscal adjustment with strengthened investment planning are needed in the context of tightened global conditions and already elevated fiscal deficits.”
