Having shifted its allegiances from India to China, the strategically placed Indian Ocean nation of Maldives is at high risk of “debt distress” according to a warning issued by the International Monetary Fund (IMF) on Wednesday (Feb 7).
The island nation has borrowed heavily from China, infamous for ensnaring smaller countries using its ‘debt trap’ tactics.
“Without significant policy changes, the overall fiscal deficits and public debt are projected to stay elevated,” IMF said in its review of Maldives’ economy.
“The Maldives remains at high risk of external and overall debt distress”.
As per World Bank estimates, Maldives owes China about 43 per cent of its national debt which comes up to $3 billion.
Muizzi laments about debt crisis
The warning by the monetary agency came a day after Maldivian President Mohamed Muizzi conceded that he could not launch new development projects in the country due to the debt situation.
“I want to carry out more development projects. But this is why we cannot start all the stalled projects and launch new projects in all the islands at once,” said Muizzu.
“The next two months will be the most difficult. This is the most critical time. It will become much easier after July. But we’re starting now to do the work necessary to earn income,” he added.
Despite lamenting about the debt crisis that his nation is facing, Muizzu has firmly planted himself in the China corner by angering New Delhi.
After his China visit last month which was a departure from the tradition of a Maldivian leader visiting India as the first foreign country, Muizzu thanked Beijing for its “selfless assistance” for development funds.
The two countries ‘upgraded’ their bilateral ties and signed 20 key agreements, including one in which Beijing pledged to extend funding for infrastructure in the Indian Ocean archipelago.
Speaking at an event at China’s Great Hall of the People, Chinese President Xi Jinping referred to Muizzu as “an old friend”.
Experts are of the view that Muizzu is following the line taken by his mentor and former president Abdulla Yameen, who ruled the island nation for five years and borrowed heavily from China.
After Yameen left the archipelago in tatters, it was New Delhi that provided the necessary help, only to be cast aside by Muizzu’s hara-kiri policies yet again.
(With inputs from agencies)
