After borrowing heavily from China, Maldives at high risk of 'debt distress', warns IMF

The International Monetary Fund (IMF) on Wednesday warned that Maldives, which has borrowed heavily from China and shifted allegiance from India, is at high risk of “debt distress.” After a review of the country’s economy, the IMF said there was a need for “urgent policy adjustment” even though it didn’t share the details of the Maldives’ foreign debt. “Without significant policy changes, the overall fiscal deficits and public debt are projected to stay elevated,” AFP quoted the IMF as saying. Beijing has pledged more funding for the Maldives since pro-China President Mohamed Muizzu took power in November. Muizzu thanked China last month for its “selfless assistance” for development funds after a visit to Beijing. “The Maldives remains at high risk of external and overall debt distress,” added the IMF. The archipelago, famed for its white sand beaches and where tourism accounts for nearly a third of the economy, has recovered economically from the Covid-19 pandemic. But while a planned airport expansion and an increase in hotels are projected to boost growth, the IMF said “uncertainty surrounding the outlook remains high and risks are tilted to the downside.” Muizzu’s mentor, former president Abdulla Yameen, who ruled for five years until 2018, borrowed heavily from Beijing for construction projects. That left it owing 42 percent of its more than $3 billion foreign debt to China in 2021, according to the World Bank, citing the Maldives’ finance ministry. Muizzu, who has requested that Indian troops operating three reconnaissance aircraft in the Maldives leave by May 10, has vowed to strengthen his military to defend the country’s vast maritime territory. Global east-west shipping lanes pass through the nation’s chain of 1,192 tiny coral islands, stretching around 800 kilometres (500 miles) across the equator.