Maldives faces risk of default; is India stepping in?

The Maldivian government has not officially requested assistance from India, but the two sides will discuss this during President Mohamed Muizzu's visit to New Delhi, according to Business Today.

The Maldives, a popular tourist destination, is facing the risk of defaulting on its foreign debt. (Source: Getty)

The report states that India is reportedly preparing to expand financial support to the Maldives as the island nation faces its first-ever default on its sukuk (a type of Islamic bond).

In June, international credit rating agency Fitch downgraded the Maldives' credit rating and warned that the South Asian tourist paradise could default on its foreign debt.

According to Bloomberg , Maldives could immediately access $400 million under the Reserve Bank of India's (RBI) currency swap program, while additional long-term loans could be available under the $800 million credit line extended in 2019.

This potential aid would help Maldives pay off foreign debts due next month, especially amid growing concerns about a potential default on sukuk, a type of Islamic bond.

The Maldivian government recently committed to fulfilling its obligations, which helped boost the value of sukuk from its record lows.

Bloomberg reports that Maldives must pay $25 million by October, part of a $500 million sukuk debt. The Maldivian Monetary Authority confirmed it is discussing a $400 million currency swap with India, but the Indian Ministry of External Affairs and other relevant agencies have not commented on the matter.

According to the Observer Research Foundation (ORF), Maldives' debt has soared to 110% of GDP as of March 2024, while foreign exchange reserves have dwindled.

Official data shows that Maldives' foreign debt exceeded $4 billion in 2023, accounting for approximately 118% of the country's gross domestic product and increasing by nearly $250 million compared to 2022.

Meanwhile, speaking during a visit to Sri Lanka on September 13, Foreign Minister Moosa Zameer said that the challenges facing Maldives are "only temporary" and that the country has no plans to seek assistance from the International Monetary Fund (IMF).

Earlier this week, Presidential Office spokesperson Heena Waleed said that the Maldivian leader would "soon visit" neighboring India. According to the Indian Express , the visit could take place in the middle of next week.

Source: https://baoquocte.vn/maldives-truc-nguy-co-vo-no-an-do-vao-cuoc-286445.html