Maldives Debt Crisis: Navigating Economic Challenges Without Bankruptcy

Maldives Debt Crisis: Navigating Economic Challenges Without Bankruptcy

Male is highly indebted, with external debt reaching around USD 4.038 billion and internal debt almost equaling the amount, despite the Maldives not going bankrupt as media headlines would have us believe. A debt crisis is expected in 2026. Official estimates place the gross national product of the Maldives, headed by Mohammed Muizzu, at USD 5.6 billion. The Chinese debt of USD 1.3 billion, with sovereign bonds expiring in 2026, accounts for over 30% of the country’s external debt, despite Muizzu’s overt anti-India position, and he requests debt relief from his close ally Xi Jinping and Islamic emirates in the Middle East. Muizzu asked for financial assistance from countries like China and Turkey, but while the island nation struggles with a severe economic crisis, no assistance appears to be forthcoming.

Even though it usually takes two days for the Chinese surveillance ship Xiang Yang Hong 03 to turn around and head for its home port Sanya, it has been parked at the Maldivian port for ten days after arriving at Male seaport on February 8 for an operational turnaround. For the record, the Chinese surveillance ship was only permitted to access the Male port for out-of-port transfers (OTR) and was not permitted to carry out any surveys or mapping of the ocean floor in the Maldives’ exclusive economic zone (EEZ). The Modi administration is in a wait-and-see posture but is fully equipped to assist the Maldives in the event of a humanitarian crisis, even though India is anticipated to replace the military crew of one ALH helicopter flying the Maldivian flag by the end of this month or early in March.

Rather than become agitated over Muizzu’s anti-India stance to save his political career, the Modi administration has approved the Indian Navy’s expansion of the airstrip at Agatti Islands, which are adjacent to Lakshadweep, and Minicoy Islands, with the approval of a new air base for Minicoy Islands. On March 4–5 in Kochi, Defense Minister Rajnath Singh will dedicate the first squadron of MH-60 R Sikorsky helicopters. He will then board India’s two aircraft carrier strike groups and go to Minicoy, Maldives, to commission INS Jatayu, a new facility.

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Although Muizzu’s anti-Indian political posturing is directed towards the April Majlis elections, public opinion of China’s Belt Road Initiative (BRI) for Maldivian infrastructure development is, at best, ambivalent. Following their high-interest loans from Chinese EXIM banks, some nations, including Pakistan, Kenya, and Tanzania, are struggling under the weight of their BRI debt.