The Maldives is grappling with a deepening debt crisis, with foreign exchange reserves at precarious levels and looming repayments threatening its economic stability, according to a report by an independent journalist and human rights activist.
According to journalist Dimitra Staikou, China‘s lending and trade policies have significantly worsened the situation, news agency ANI reported.
The island nation’s total debt has surged from $3 billion in 2018 to $8.2 billion as of March 2024, with projections exceeding $11 billion by 2029. External debt stands at $3.4 billion, primarily owed to China and India.
In 2025 and 2026, the Maldives must repay $600 million and $1 billion, respectively, exacerbating its financial strain.
Despite a modest rise, usable foreign exchange reserves remain below $65 million as of December 2024, after briefly turning negative in mid-August.
The ongoing crisis has led to credit rating downgrades by Fitch and Moody’s, reflecting investor concerns over sovereign default risks.
The China-Maldives Free Trade Agreement (FTA), enacted in January 2025, has intensified economic vulnerabilities.
While bilateral trade stands at $700 million, Maldivian exports make up less than 3%, with China dominating imports.
Government revenue from import duties has plunged by 64%, worsening fiscal pressures.
In response, President Muizzu’s administration has raised taxes, cut government spending, and sought financial aid, including $300 million from GCC nations and $200 million from China, but has received little support.
A $750 million currency swap from India has provided temporary relief but falls short of covering the $1 billion Sukuk repayment due in 2026.
Without significant international intervention or debt restructuring, experts warn the Maldives risks following Sri Lanka into sovereign default, endangering its economic sovereignty and political stability.
(With inputs from IBNS)
