IMF flags ‘debt distress’ risk for Maldives after Muizzu govt’s pro-China tilt

Muizzu, who was on an official visit to Beijing last month, thanked China for its "selfless assistance" for development funds

The International Monetary Fund (IMF) has flagged the high risk of "debt distress" in Maldives, in the aftermath of the Indian Ocean island region seen to be further shifting political allegiance towards China, its largest external creditor.

"Without significant policy changes, the overall fiscal deficits and public debt are projected to stay elevated," the IMF, which conducted a review of the scenic archipelago's economic situation, said in a statement.

"The Maldives remains at high risk of external and overall debt distress," the global monetary body added.

Maldives, placed strategically-placed in the Indian Ocean, has shifted allegiance towards China and diplomatically distanced itself from India following the presidential elections last year.

The government headed by Mohamed Muizzu has been accused by the Opposition of leaning towards Beijing while harming relations with New Delhi. The ties with the latter have deteriorated, point out analysts, as one of the first decisions taken by Muizzi after taking charge was asking India to withdraw its military personnel from the island nation.

The relations with India further turned sour after three Maldivian deputy ministers used objectionable language against the neighbouring country, and its Prime Minister Narendra Modi, after a social media debate erupted over the latter's visit to Lakshadweep Island.

The ministers were sacked by the Maldivian government after the controversy snowballed.

Muizzu, who was on an official visit to Beijing last month, thanked China for its "selfless assistance" for development funds.

'Urgent policy adjustment'

The IMF did not give details of the Maldives' foreign debt but said there was a need for "urgent policy adjustment".

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.

With AFP inputs