China’s Lending Practices Drive Maldives Towards Economic Sovereignty Crisis
The Maldives is facing a grave debt crisis attributed to mounting external obligations mainly from China and India. The national debt has surged from USD 3 billion to USD 8.2 billion since 2018, with dire repayment schedules ahead. Efforts by the government to manage the crisis, including reactions to unfavorable trade agreements, have thus far proven inadequate, raising concerns about imminent sovereign default.
The Maldives is enduring a severe debt crisis, driven by dwindling foreign exchange reserves and substantial impending debt repayments. Human rights advocate Dimitra Staikou details in her article that China’s lending practices have significantly contributed to this financial turmoil. The total debt, which was USD 3 billion in 2018, has escalated to USD 8.2 billion as of March 2024, with projections estimating an increase to over USD 11 billion by 2029.
Currently, USD 3.4 billion of the Maldives’ debt is external, predominantly owed to China and India. The immediate financial obligations include servicing USD 600 million in 2025 and an overwhelming USD 1 billion in 2026. Foreign exchange reserves have improved to below USD 65 million as of December 2024, yet they faced negative values earlier in the year, underscoring a severe balance of payments crisis.
International lending organizations have downgraded the Maldives’ credit rating, with Fitch cutting the rating three times in recent months, and Moody’s maintaining a negative outlook. The China-Maldives Free Trade Agreement (FTA), initiated in January 2025, has compounded economic vulnerabilities, with the Maldives exporting less than 3% of USD 700 million in bilateral trade, while China dominates with 97% of imports. Staikou notes that significant concessions, such as removing tariffs on 91% of imported goods from China, have not yielded equitable benefits for the Maldives.
The Maldives is at a critical juncture, facing an escalating debt crisis exacerbated by unfavorable lending practices and trade agreements with China. Despite government initiatives to alleviate the situation, the nation is still projected to encounter significant financing gaps in the years ahead. Without substantial international assistance or restructuring of its debt obligations, there exists a palpable risk of the Maldives defaulting on its sovereign debts, which poses threats to its economic and political sovereignty amidst pre-existing challenges such as climate change.
Original Source: www.aninews.in
