Maldives seeks China’s fiscal support to carry out economic reforms to address debt distress

Maldives Foreign Minister Moosa Zameer met Chinese counterpart Wang Yi and briefed him on the economic and fiscal situation in the Maldives, emphasising the importance of carrying out diligently, the fiscal reforms as announced by Maldivian President Muhammad Muizzu.

Beijing: Maldives Foreign Minister Moosa Zameer on Monday met his Chinese counterpart Wang Yi and sought Beijing’s support to carry out fiscal and economic reforms to develop its debt-ridden economy.

Zameer met Wang and briefed him on the economic and fiscal situation in the Maldives, emphasising the importance of carrying out diligently, the fiscal reforms as announced by Maldivian President Muhammad Muizzu, a press release issued by the Maldives Foreign Ministry said.

Zameer also requested China’s support in carrying out the reform programme that will foster consumer and investor confidence in the Maldivian economy, thereby positively impacting the island nation's economic resilience.

Zameer and Wang held extensive bilateral discussions, the press release said.

Wang reaffirmed Beijing’s commitment to further strengthen the historic and friendly relations between the two countries. Zameer thanked China for its substantial support through the Belt and Road Initiative (BRI), which has played a pivotal role in the Maldives' socio-economic development, it said.

The meeting concluded with both parties reiterating their commitment to exploring new avenues for cooperation, the release said.

China has scaled up its relations with Maldives, since Muzzu, widely regarded as a pro-Beijing leader, took over power last year.

During Muizzu’s visit to Beijing, the two countries elevated their ties to a comprehensive strategic cooperative partnership and signed 20 agreements. Since then Maldives permitted China’s ocean research vessels, widely regarded as spy ships to berth in its waters much to the concern of India.

In May, the International Monetary Fund (IMF) warned the Maldives that it faces a high risk of debt distress without significant policy changes. The IMF noted that the Maldives' current account deficit is expected to remain large and that its overall fiscal deficits and public debt are projected to stay elevated.

Subsequently, the Muizzu government sought restructuring of loans from China. The Maldives' debt to China reportedly amounted to over USD 1.3 billion.

In the same month, Chinese Ambassador to the Maldives Wang Lixin said discussions are being held between the two countries on providing some form of ease in debt repayment on the loans currently taken from China by the Maldives government.

She, however, maintained that debt restructuring is not the solution, as doing so would obstruct the Maldives from seeking further financial aid from China, the Maldives media reported.

Wang stated that China, too, is deeply concerned about the rising debt of Maldives, adding that their policy is to move forward in a manner that would not further add to this debt.

"You also would have noticed that now, China is issuing grants to the Maldives. We are prioritising providing free aid to the Maldives, so as not to further increase Maldives' debt," she said.