Maldives is at high risk of foreign debt crisis. The Maldives, strategically nestled in the Indian Ocean, is grappling with mounting economic challenges amid warnings issued by the International Monetary Fund (IMF).
The IMF’s latest assessment has underscored the precarious financial position of the island nation, primarily attributed to its burgeoning debt, largely owed to China, and a noticeable shift in diplomatic allegiances away from India.
Since assuming office in November, President Mohamed Muizzu has fostered closer ties with China, resulting in increased financial assistance from Beijing for developmental projects.
Muizzu’s expression of gratitude towards China for its support underscores the deepening relationship between the two countries, prompting concerns about the Maldives’ growing dependence on Chinese investments.
The IMF’s stern warning has emphasized the urgent need for the Maldives to implement significant policy adjustments to address its fiscal deficits and mitigate the looming threat of debt distress.
Despite signs of economic recovery following the COVID-19 pandemic, persistent uncertainties loom over the nation’s economic outlook, particularly concerning future growth prospects and the sustainability of its external debt.
Under the previous administration of President Abdulla Yameen, the Maldives had heavily relied on Chinese loans to fund infrastructure projects, resulting in a substantial portion of the country’s foreign debt being owed to China.
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Now, Muizzu’s government faces the formidable task of managing this debt burden while simultaneously pursuing economic growth initiatives.
Moreover, Muizzu’s recent decision to request the departure of Indian reconnaissance aircraft from the Maldives underscores a shifting geopolitical landscape in the region.
With an eye on bolstering the country’s military capabilities to safeguard its vast maritime territory, Muizzu has emphasized the need to prioritize national security amid evolving regional dynamics.
As Maldives is at high risk of foreign debt crisis, its economic stability and security have assumed paramount importance.
