Saeed: Maldives will not go bankrupt, lenders will reschedule debt

Maldives’ Economic Minister Mohamed Saeed dismissed media reports that the Maldives will soon go bankrupt, expressing confidence that the island nation’s biggest lenders with reschedule the country’s debt repayment plans.

Credit rating agencies have been downgrading Maldives’ credit rating citing high risk of default on its daunting external debt obligations.

But at the GM Forum 2024 hosted by travel magazine Hotelier Maldives on Thursday, Saeed repeatedly emphasized that Maldives will not go bankrupt.

He said that Maldives has overcome all major global crises to date, such as the 2004 tsunami and the Covid-19 pandemic.

“…And Maldives bounced back. That’s the beauty we have. That’s the identity we have,” he said.

Saeed said that Maldives’ situation is different from its neighbor Sri Lanka, which declared bankruptcy in the wake of the Covid-19 pandemic.

He said that the Maldives’ economy is showing strong growth despite its fiscal challenges.

“Projections made by World Bank, IMF and of course central bank. Forecasts are like 4.1 percent growth the remaining part of this year and over 6 percent for the year 2025,” he said.

“The issue is the fiscal situation. That is what is inherited to us.”

Saeed said the Maldives is engaged in “24/7 discussions” with its two biggest lenders – China and India – to push back debt repayment schedules.

“We are quite confident these massive lenders will give us comfort,” he said.

“We are not going bankrupt. We are not going bankrupt. But the mainstream media is so passionate today that they are talking about Maldives. And there are plenty of reasons. Because we are Maldives. We are in the middle of the Indian Ocean. They are so fond of talking about Maldives, squeezed in between some big geopolitical powers.”

Saeed insisted that Maldives is “not squeezed between anybody”, dismissing such claims as sensationalized articles to sell newspapers.

Moody’s downgraded Maldives’ credit rating from ‘CAA1’ to ‘CAA2’ on September, citing an increased risk of default on its external debt obligations. It came after Fitch downgraded the country’s rating from ‘CCC+’ to ‘CC’. The country has an external debt service obligation of about USD 600 million in 2025 and more than USD 1 billion in 2026.

In a statement in response to the downgrade in Maldives’ credit rating, the Maldives Monetary Authority (MMA) reaffirmed the capability of the government to meet its external debt obligations, including the external bond repayment in October.

The MMA said that both the gross international reserves and usable reserve has improved, with USD 444 million at the end of August, coming up from USD 395 million at the end of July.

It expects the gross international reserves to surpass the USD 606 million projected in the 2024 budget.

The central bank said that work is underway to reduce the MVR 6.7 billion surplus liquidity in the banking system by utilizing monetary instruments in order to minimize the challenges to maintaining exchange rate stability. The bank is also set to commence open market operations this year to mop-up the surplus liquidity.

The MMA is also set to announce revisions to monetary regulations in September to overcome challenges to the foreign exchange market, which is expected to boost the amount of foreign currency entering the domestic banking system.

“There remains no doubt that the MMA and the Government of the Maldives, together with all related government institutions, will be able to meet all future external debt obligations,” it said.